This is a guide or road map by a man, whose knowledge of such an “esoteric” science like Economics was learnt on the streets of the world. So, calling me streetwise could be quite descriptive. Let’s go at how I think Nigeria can get out of the current economic quagmire and degraded naira.
First, let us rescue the naira;
No, not all the denominations but the 500 and 1,000. We read the gory tales of how one of our former military chiefs would order his military accountant/pay master to exchange more than 800m for dollars and other currencies every month end; we have heard about the soakaways and water tanks filled with naira; we have heard about how the security details of one high-ranking politician carted away more than 300m cash in one fell swoop; all our money that is stolen at the local government level, embezzled at the state governments, parastatals and all the MDAs. All the pillaging and purloining, diverting and misappropriating at various Government Houses, legislative houses, business houses and kickbacks, all of them are stocked and warehoused in cash in private safes; underground bunkers, store rooms etc. They are mostly not in the banks.
At every opportunity, the owners invade the black market to exchange the naira for dollars, pounds and other foreign currencies. These “owners” are prepared to buy the foreign currency at any price. Any price; because they have excess naira. These are the ones whose demand for forex devastates our naira.
Traders, real business people and manufacturers who need forex to sustain their productivity are wary of replacement value and are fearful of the capacity of their customers and off-takers to afford the new prices which the high cost of forex will impose; they are not going to buy forex at any price because their businesses and customers will not be able to afford the increases. So, they close shop, retrench, or change their line of business. They are victims; they keep hoping their banks will help them secure forex at bank rates.
So, if the government announces tomorrow that the currency will be changed in two months, we will experience a complete battery of the naira; it could exchange for as much as 2000 to the $1 as most of these crookedly acquired naira is outside the banking system and the owners of the naira may not be able to return the money into the banking system because of the restriction on how much cash can be deposited in one transaction and the requirement of the law that any deposit above a particular amount must be recorded and reported to the authorities. If you have 5bn cash, even if you employ your whole village, you will leave a trail, so to the black market to chase dollars all the “illegal” naira will go.
The government must change our 500 and 1000 notes before the end of the first quarter of 2017, if we want to attract all the huge money into the banking system. This will help the economy as all the banks will be awash with cash and the liquidity crunch will vamoose. The banks will become liquid and awash with cash. They will immediately survive the Treasury Single Account cash crunch and the banking economy will begin to look brighter with less pressure on the staff to go get deposits, because the only way those with all these funds can exchange them for the new currencies is to get them into the banking system.
I must confess that this idea, unlike the first, is not originally mine; I will give credit to former President General Obasanjo, who while in support of the sale of some national assets, prescribed that it be done through the stock exchange.
If you want a riot which no police force, JTF or any force can stop, attempt to sell our stake in the NLNG to any corporate or cabal or person or institution of whatever colour. But if, like Obasanjo suggested, the government brings five of its stake in the NLNG into the stock market through an Initial Public Offering with clear instruction that no entity can buy more than a particular allotment, we would have used one stone to kill so many birds as our capital market will get some badly needed oxygen. The government will get the needed liquidity to fund the budget or whatever and the people of Nigeria will also have a personal stake in the goose that lays the golden eggs. The revival of the capital market will add fillip to economic activity.
In addition, the Nigerian Communications Commission can “persuade” the big telcos, viz, MTN, Glo, Airtel and Etisalat to sell maybe 10 per cent of their shares in the capital market.
The irony of the Nigerian experience is the hypocrisy which all our governments practise when they prohibit or ban goods which all the authors of the ban use; take imported fabrics and furniture for example.
The only people who benefit from these bans and prohibitions are smugglers and corrupt Customs officials; the government loses revenue and income.
It is not true that Nigerians prefer foreign goods to Nigerian goods; what I know to be true is that Nigerians prefer quality goods; that is why Nigeria is the only place where you have even grades of inferior or fake goods; yes, there are grades of “Taiwan” products and “Tokunboh” products and even grades of “fairly used” products. In the fairly used category, the highest grade is called “follow come” while the new products are simply called “tear rubber”. I love this country. Nigerians prefer Nigerian-made cables and wires because they are the best quality; when cars used to use tubes, Nigerian-made tubes were the best.
My recommendation that the monthly allocation to the three tiers of government by FAAC where all the state commissioners of finance and their accountants general go for the monthly ritual of our “feeding bottle federalism” apologies Senator Ike Ekweremadu, be made in dollars. My reason being that most of the money shared are revenue from our oil and gas exports and this is in forex; the naira components must be distributed in naira (These are largely VAT, Customs duties and FIR sources). Since all the money is paid through the banks, the forex should be paid into the state and local government accounts in their nominated banks. The legal tender in Nigeria is naira, when the governments want to draw their money, the banks will pay them the naira equivalent as the dollars would have been exchanged for the naira payments of business people and other genuine consumers of forex like students’ school fees approved by the Central Bank of Nigeria. On no account would the banks pay dollar/forex cash under this very well-monitored regime to the states and their governors.
It is a notorious fact that once the monthly allocation is received, the corrupt government officials head straight to the black market to buy dollars on behalf of their principals; but with our proposal, if they want to go to the black market after collecting naira from the banks, no problem; as the legitimate genuine users with Letters of Credit and the CBN approved invoices can purchase dollars from the banks.
In addition to this, the Federal Government must abolish the dual exchange rate practice where some favoured interests are allocated forex at “an official rate”, different from what others can get from the banking system. The Emir of Kano and former Governor of Central Bank of Nigeria, Alhaji Muhammadu Sanusi, sometime ago informed the whole world that a new generation of millionaires have emerged from those who receive such favourable allocations. These rent takers who clearly have considerable influence in very high places will fight to ensure the current policy continues as they are gratuitous beneficiaries of a policy that will keep us in recession and keep them awash with cash via arbitrage.
If all these measures which are not difficult to execute are implemented, we shall witness a recovery of the naira; a recovery of our capital market; a recovery of our manufacturing and real sectors, a rejuvenation of our banks with liquidity; a leash on corrupt government officials’ access to unlimited cash as even the governors must return ALL the security votes they have stashed away in Government Houses and sundry safes into the banking system to exchange for the new currency. The recovery of the naira will happen before our eyes by the Second Quarter of 2017; if our recommendations are religiously implemented.
Chief Azike, Member of the Honourable Body of Benchers, wrote in from Lagos via firstname.lastname@example.org
Copied from Punch.
There is no ads to display, Please add some