By Taiwo Adisa
Last week, the National Assembly undertook one of the major responsibilities assigned to it by the 1999 Constitution when the two chambers engaged the Federal Government’s economic team on different occasions. Not many are aware that of all the variety of functions the legislators parade, representation is the one the Constitution values most. If the people sense a lack of adequate representation, the law gives them the power to recall the lawmaker.
The House of Representatives was the first to hear from the economic team, which included the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, Governor of the Central Bank of Nigeria(CBN), Mr. Yemi Cardoso, the Minister of National Planning, Senator Atiku Bagudu and the Chairman of the Federal Inland Revenue of Nigeria(FIRS), Dr. Zack Adedeji.
I would say that I was disappointed reading the reports of the House’s engagement of the team members, especially as the reports all looked as if the CBN governor only came to the chamber to reel out data and got applauded by the Reps.
I was a bit impressed by the interactions between the Senators and the economic team on Friday. Even though some Committee Chairmen made it look as if timekeeping was of more importance than the assignment at hand, many of the Senators held their own and asked penetrating questions.
Abdul Ningi, the Senator from Bauchi state said he would not have spoken because the exercise was all about “rhetoric continues” and that the dollarisation of the economy was the big issue. A number of the Senators, including Senator Ned Nwoko also hit the bull’s eye with different questions.
We have heard so many stories from radio and television economists since the Naira started taking its undue tumble, mid-last year. Many applauded the move by the President to float the Naira and introduce what they called the “willing buyer, willing seller option,” in line with the dictates of the International Monetary Fund (IMF) and the World Bank. They said the Naira at N750 to the dollar was “overvalued” and that floating the currency would ensure it found its “true value.”
But that 85-year-old economist of true value, Dr. O.A. Lawal, the man who wrote the Ordinary Level Economics textbook most of our westernised economists of today, read in their formative years had warned against floating the Naira. He said in an interview I had with him that doing so would kill the Naira. That was in July when the dollar exchanged for N750 to the dollar. But at the close of business on Friday, the Naira was exchanged to the dollar at N1,490.
Dr. Lawal had said at the time: “When the IMF said that the Naira was overvalued, that was when they introduced the Structural Adjustment Programme (SAP) and they said we should devalue the Naira by 60 per cent. But under the SAP, we devalued the Naira by more than 500 per cent. We introduced SAP and the Second-Tier Foreign Exchange Market (SFEM).
“ What they are doing today is to destroy the Naira for us, if care is not taken. That is why they introduced the floating exchange system. Our economy is not so strong because we depend heavily on the importation of machinery and even raw materials.”
He recommended what he called a “managed exchange system,” whereby the currency will be allowed to fluctuate within two narrow limits; an upper limit, and a lower limit. “For instance, the lower limit could be N600 to $1, while the upper limit could be N620 or N650 to the dollar,” he said adding that the narrow limit was necessary to avoid arbitrage. Today, the difference between the budget benchmark of N800 to $1 and the unofficial rate of N1.490 is more than N700, so for the dollar lords, the music continues.
Though I heard the Senators ask some questions which the Rep members did not Cardoso, the CBN governor largely glossed over the real issues and resorted to preaching to Nigerians for a change in attitude.
I have not seen a country around the world where the nation’s currency is not regarded as a store of value by the elite. The problem with our Naira is that the elite no longer believe in it and there is nobody out there to enforce the laws. That simply is the story of the free fall of the Naira; away from the theoretical postulations we hear from television analysts these days.
An economist, Mr. Lai Omotoso, who appeared on an Arise television programme last week equally hit the nail on the head when he said that Cardoso knows one pronouncement he would make and the Naira rate would reset itself almost immediately.
What he was driving at was the international best practices on the management of national currency. If the CBN cannot defend the Naira, who will? That should be our question to Cardoso.
I will give him the example of the United States, whose currency is never allowed to go beyond a threshold. But they said our currency is falling because we are a debtor nation. Yet the same people came around to say debt is not a problem and that the USA is the most indebted in the world. The UK Pound has never been allowed to go below a threshold, even when the economy entered recession. The situation between the Canadian dollar and the US dollar is intriguing. Inside Canada, the Canadian dollar is higher than the US dollar. That’s the making of some economic managers.
When the CBN throws its hands in the air about the fate of the Naira, there is an element of insincerity in there. How many of the schools, restaurants, hotels, and estates denominating their charges in dollars have been dealt with? On a trip to Geneva, Switzerland some time ago, a hotel refused to check us in because we had only US dollars and the hotel had reached its limit for the day. We couldn’t solve the problem till around 1 am, having arrived in Geneva late. Here in Nigeria, some money miss roads would spray dollars at owambe and EFCC would look the other way.
Let me warn here that #END SARS was a spontaneous occurrence. In recent weeks, we have seen protests about food prices in Niger and Kano, we shouldn’t allow a conflagration before we deal with the currency manipulators behind the fall of the Naira.
