BY LEKAN SOTE
Ever wondered why Nigeria’s military rulers, their civil servant collaborators, and the neo-colonial Western powers, brought down the commodities marketing boards that accumulated hard currency after trading cash crops on behalf of farmers with the metropolitan economies?
The policy compromised the capacity of the Nigerian economy to accumulate enough foreign currency to finance its import-oriented economy, thus further making Nigeria’s economy beholden to the metropolitan economies.
It gets even more compounded with unconfirmed reports that America recently decided that any American dollar note dated before 2021 will no longer be honoured by the Federal Reserve (America’s central bank) from January 31, 2023.
Recall that former Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, practically went on bended knees to persuade International Oil Companies to sell American dollars to erstwhile importers of petroleum products to Nigeria. It looks as if that option is no longer available.
Nigeria’s 2016 Bilateral Currency Swap with China was intended to use the Chinese Yuan to reduce the pressure on the Naira as it runs after American dollars to fund import of strategic consumer goods. Ironically, China’s currency is backed by the American dollars.
China had made several efforts to take advantage of attempts by the countries of the South to seek an alternative to the use of the American dollars as the major hard currency of the world’s international trade.
When it looked as if the “W,” in the World Bank is for “West,” and not “World,” China set up the New Development Bank in 2014, in concert with Brazil, Russia, India and South Africa (the BRICS bloc of nations), with $50 billion to provide development fund for the world’s emerging markets.
Also, in 2015, China led a consortium of 50 Asian countries to establish the Asia Infrastructure Investment Bank with a share capital of $100 billion to finance infrastructure projects within the Asian region.
China launched some unilateral funding plans, like South-South Cooperation Fund, to be funded with $20 million annually, and the $40 billion China Silk Road, to finance China’s Belt and Road Initiative, a Chinese plan to invest throughout the world.
The stated purpose of China’s Belt and Road Initiative is to “promote (a worldwide) economic development and inter-regional connectivity,” which, if you like, is an indirect plan to be the world’s next neo-imperialist power.
Interestingly, China is experiencing what observers described as loan-giving fatigue! It’s even resorting to forcefully taking possession of infrastructural facilities that it financed. It was recently reported that China seized Uganda’s Entebbe International Airport that was financed with Chinese loan. That’s a high level desperate action.
All Uganda’s Finance Minister, Matia Kasaija, could do was to apologise to the Uganda Parliament for accepting terms that made Uganda agree to yield the airport to Chinese lenders if Uganda was unable to service or repay the loan.
Instead of developing an industrial and manufacturing policy that uses local agricultural crops as raw materials, Nigeria’s policymakers introduced an import-substitution manufacturing model that still depended on imported machinery and raw materials that are native and available only in the metropolitan economies.
“It’s not fair for America to have an unlimited supply of the dollars and simply print it in order to pay for goods it buys from Nigeria, whereas Nigeria must be scrambling to accumulate America’s currency in order to buy American goods”
The administrators of Nigeria’s foreign exchange policies also came with the colonial mentality that accepts, without questioning, that Nigeria will always export agricultural and mineral commodities, like cocoa and petroleum, and import strategic consumer goods, like foodstuffs, manufacturing raw materials and petroleum products.
Nigerians are watching with helpless despair as the Naira started to depreciate at a frenetic frenzy after Governor Godwin Emefiele of the Central Bank of Nigeria announced plans to redesign and reprint the N200, N500 and N1000 denominations of the Naira.
Classic economy theorists, who pander only to the interest of the Western cosmopolitan powers, prescribe, almost as an article of faith, that peripheral economies, like Nigeria, must accumulate the currency of metropolitan economies in order to finance their imports.
But they neglect to add that the metropolitan economies too must reciprocate by accumulating the Naira, for instance, in order to pay for primary goods, like cash crops and mineral resources that they import from Nigeria.
It’s only fair that economies on both ends of the trade chain should have an inventory of each other’s currency to purchase goods from each other. That seems to be a fair way to an equitable world economy.
Adam Smith, who suggested foreign trade, should have counseled the metropolitan economies to continue to trade by barter, as when they traded with the Phoenicians, or earn the currency of potential trade partners.
A Western public intellectual has confessed that the West uses Eurobonds that are usually repaid and serviced with the American dollars, to compound the debt dilemma of poor peripheral economies.
If it has to retire or service a Eurobond denominated in American dollars, America simply prints more of its currency. But if Nigeria were to retire or service a Eurobond, Nigeria must buy American dollars or export something to acquire the American dollars. Otherwise, no one can do it.
It’s not fair for America to have an unlimited supply of the dollars and simply print it in order to pay for goods it buys from Nigeria, whereas Nigeria must be scrambling to accumulate America’s currency in order to buy American goods.
It gets even worse for francophone African countries who, Dr. Arikana Chihombori-Quao, former African Union representative to America, says, must endure the double jeopardy of sourcing for as much as $500 billion annually to fulfill annual quotas of remittance to the French central bank for goods that they did not buy.
France just has a sense of entitlement, the vestige of a forced agreement that compels francophone African countries that demanded political independence to remit a portion of their annual earnings to France.
The more weird –maybe incomprehensible and reprehensible– part of it is that whenever those francophone African countries wanted a part of their money back, they had to borrow it and pay interest.
It was the pound of flesh that the French Shylock extracted as a price for giving political independence to the former French colonies. France argued that the remittances will be extracted –in perpetuity– for the infrastructure that colonial France built for those countries.
This inhumane arrangement sentenced the people of these former colonies into chattel, what the Yoruba describe as “Iwofa,” or bonded workmen, who served for life. You may wonder how a Christian nation could tolerate such wickedness and bold larceny.
It looks as if Bola Tinubu, former Governor of Lagos State and presidential candidate of All Progressives Congress, understands the problem and what to do, as he demonstrated at the Town Hall Meeting he held with Nigeria’s Organised Private Sector.
Wale Edun, Tinubu’s former Commissioner for Finance, hinted that a Tinubu Federal Government will be dragging more citizens into the tax net. This could substantially provide cash to fund (especially the electricity) infrastructure that may grow Nigeria’s economy and help Nigeria avoid borrowing from the metropolitan economies.
Though most of the hardware for the electricity infrastructure will be sourced offshore, tax revenue that may be available to the government should reduce the pressure on Nigeria to seek and have to serve foreign loans.
If Nigeria produces its needs, it could turn the table, by insisting on being paid for its exports in Naira, like Russia asks to be paid Ruble for its gas.