BY LEKAN SOTE
From the rule book of economist Henry Boyo, the Naira will continue to depreciate as long as the Central Bank of Nigeria uses the American dollar, or any other currency to measure the value of the Naira. The American dollar, propped up the global petroleum business, will always be in high demand, which will make it scarce, and therefore expensive to procure.
After the Israeli-Egypt Six-Day War of 1973, America made a deal to guarantee the perpetuity of the House of Saud as rulers of Saudi Arabia if the king agrees that the global business of petroleum, the world’s most traded commodity, will be transacted with American dollars.
The dollar acquired the prefix, “petro,” to demonstrate its affinity with global petroleum trade. Now no one has a doubt as to what anyone may mean with the term, “petro-dollar.
“This conspiracy between America and Saudi Arabia, leader and most influential member of the Organisation of Petroleum Exporting Countries cartel, freed the American currency from the gold standard.
So America’s dollar instead became the gold standard for other currencies including the Ruble of Russia, its Cold War enemy, and the Yuan of China, latter-day economic super power, that has become even more cantankerous as the second richest economy in the world.
Partly because of the Saudi-America petro-dollar deal there are more American dollar notes outside America than within America, which effectively makes America the central banker of the world.
Practically every international business is carried out, or at least, denominated in the American dollar, never mind the pretense of the Euro, British Pound Sterling, French Franc and German Deutsche Mark.
Business is conducted in dollars even within the most buoyant economies of Europe, North America and Asia. And this puts immense pressure on the business of acquiring the dollar for business purposes.
Every country, including Russia and China, who are perpetually in conflict with America over practically every issue, have stockpiled their vaults full with American dollars. The usually Americentric international media, defined and beholden to America’s imperialism, has sold the American dollar almost as the most essential article of trade globally. As you know the value of a currency is derived from the confidence placed in it by economic agents.
“Nigeria’s current set of political elite are an extravagant, spendthrift and unimaginative lot, who do not seem to know the nature and gravity of Nigeria’s economic problem, not to talk of how to resolve it”
And to make it acceptable for the world, American economists came up with the dubious concept of fiduciary money, or money not backed by the gold standard, but by the confidence it commands in the marketplace.
The law of supply and demand dictates that whenever demand for an article of trade is high, the price or its exchange rate rises. The obverse, whenever demand drops, the price drops, is also true.
With the global nature of the petrol-business that uses America’s dollar as means of exchange and measure of value, Nigeria, a petroleum exporting country, will always be in search of the dollar to finance its huge import bill, a significant part of which, ironically, is to import petroleum products.
Nigeria, with its decidedly disarticulated economy that produces what it cannot consume, but consumes what it cannot produce, is a sure candidate for an extremely weak currency. For its inability to produce what it needs, its demand for dollars to finance its import bill far exceeds its capacity to export its primary products. The unfavourable balance of trade pushes its government to a debt acquiring binge.
Nigeria’s predicament makes it return nearly every dollar it receives as revenue or loan back to the metropolitan economies in a most bizarre vicious cycle that will probably not abate in a long time.
The Chinese are more clear-eyed about returning proceeds of the loans they give back to their economy than the West: They simply insist on bringing in their personnel to make use of the materials they have brought in to execute the contracts that their loans were issued for.
Nigeria’s current set of political elite are an extravagant, spendthrift and unimaginative lot, who do not seem to know the nature and gravity of Nigeria’s economic problem, not to talk of how to resolve it.
The regime of high demand for the American dollar to import foreign consumer goods will very likely continue, because, by default, the metropolitan economies are geared to exploit economies that have not mastered the art of adding value to their primary raw materials and turn them into industrial manufactures.
It’s a cruel irony that Nigeria, which should be reaping huge revenue from the gap created by the Ukrainian-Russian War in the petroleum business, is even losing whatever revenue it realises from export of petroleum to importation of expensive petroleum products.
Whether subsidized or not, the Nigerian economy and its citizens are losing immensely to the high cost of imported petroleum products. Nigeria, with the highest deposit of natural gas, still imports cooking gas.
Not too many believe that Nigeria’s currency, the Naira, is printed by Nigeria Security and Minting Company established for that purpose on Victoria Island in Lagos and Abuja. You get no prize for guessing correctly that if the Naira is printed in the more mature metropolitan economies it will be paid for with the American dollars that has become a global currency.
Sometimes the metropolitan economies actively sabotage the competitive capability of the lesser economies: They hire and empower many of the local bright boys into their multinational corporations, overpay and set them against their own domestic system.
They become errand boys in the blue chip multinational companies. The more sophisticated of them are pushed into the governments, as advisers, ministers or even Presidents of their victim countries– to work as spies of, and collaborate with, the multinationals, from the corridors of power.
You may have seen these lackeys in their well-appointed residences in the toniest neighbourhoods of their countries’ major cities, chauffeur-driven in the most expensive cars, wearing the latest fashions, sending their children to study in the best schools overseas and travelling first class by air.
They are so well paid that they can afford pretty much whatever catches their fancy. And they never fail to show off their toys and privileges to their fawning, but less privileged, compatriots. But you can’t blame the multinational corporations, the agents of international monopoly capital, for selling their excess consumer goods to less endowed economies.
That, exactly, is what the doctor, Adam Smith, patron saint of the economics profession, ordered in his book, “The Wealth of Nations.” He counseled the metropolitan economies to actively seek to sell their excess farm produce and industrial manufactures to lesser endowed economies.
There is an elaborate infrastructure to take the business of the metropolitan economies to the economic spaces of the less endowed countries. And, to ensure that their money is paid without delay, they invented the foreign reserve to finance the import trade of the weaker economies.
And to make the imported consumer goods acceptable, they put them in slick packages and use persuasive advertising messages to convince the consumers, most of whom suffer high level inferiority complex, to buy.
Somebody observed that the metropolitan economies mixed great technical development, with grave moral depravity. As you know, they used slavery, colonialism and theology to subdue the peoples of the lesser economies.
To strengthen the Naira, Nigeria must up its Gross Domestic Product game, to produce at least its consumer goods needs.
