By Adefolarin A. Olamilekan
News in Nigeria over the weeks has been full of the latest bold steps as against farce action’s of the Nigerian state in the past. In terms of taken a courageous action in monetary policy, such as the unification of Foreign Exchange Market. President Tinubu in his inaugural swearing in speech call’s for forex unification makes press headlines not just at home but drawn a worldwide attention, that formed economic discussion on television, radio and others. This writer was humbly engaged in several interviews and interventions on electronic media platform to review forex unification in Nigeria.
Interestingly, the question frequently asked is, whether forex unification is a progressive economic action ? And in response to this, l did maintained it is progressive, yet required a sound currency. It progressiveness, unfortunately comes with both positive and negative implications. Worth mentioning is that, it progression could also be a farce on the economy.
The fact is for us not to be carried away by the enigma argument that it is progressive, it imperative to clarify it negative hangs.
With out doubt, FX unification is crucial to addressing Nigeria’s economic challenges. However, the Tinubu’s lead government must prepared for the problem associated, such has rise in government debt in dollar’s particularly in naira equivalents. As debts own locally and externally is one action why many Nigerians detest the Buhari administration.
For us, the new regime of monetary action by the Central Bank of Nigeria floating the naira and unifying all exchange rates into the Investors (Importers) and Exporters (I&E) Window, and the Deposits Money Bank (DMBs) providing FX for school fee’s,medical, Personal Travel Allowance (PTA),Business Travel Allowance (BTA) with restriction on 43 items.
Applauded, by many experts has leeway to solving the USD cash shortage and eliminating it premium on various sectors of the Nigeria’s economy comes with positive consequences.
Instructively, the window creations of a ‘Willing Seller’ and a ‘Willing Buyer’ is a foregone conclusion that the market forces would determine exchange rate’s. Arguably, the window marks a pivotal moment has Tinubu’ s administered the nation’s monetary engine, with the objective of removing significant distortions that exist has forex multiple rates and platforms.
Grippingly, this piece address two things, the first, to point out that, unification of foreign exchange market without strengthening the naira is farce; the second is to find out if Tinubu’s FX unification will not end as farce monetary action?
The naira in the last three decades have been under the burden of shared de- productive economic cycle. A situation that shows the country’s was on economic auto reversed,import dependence and de- industrialization syndrome. Courtesy of the governing elites systemic and systematic anti naira policies. That created abysmal infrastructure deficit in electricity power,railway, road and others. While availability of sound infrastructures would have aid production, and enhance the manufacturing sector growth. The Nigerian state, civilian or military successively, deployed and implements economic policy that have no bearing on strengthening the naira.
A case in point is the obvious failure of the Buhari administration beautiful Economic Recovery Growth Plan (ERGP), that encapsulate the economic diversification policy. But lacking the economy will to factor in policy direction on naira potency, but allowed inflation to deepened and worsened naira value.
Another, is the 16 year’s of PDP government of Obasanjo, Yar’Adua and Jonathan less attention to strengthening the naira. Though, initiated multi sectoral policies such as the National Economic Empowerment Development Strategy (NEEDS), The Seven Point Agenda (TSPA) and Transformation Agenda (TA). Respectively, the policies failed to tie the nuts on strengthening the naira, reason been that their so called considerable pragmatic policy actions were mere cosmetic that cherished given out hand out as economic development and empowerment. Meanwhile, the problem fatting, citizens get poorer and naira was on live supports.
Having said, under any economic paradigm, all policy of government fiscal or monetary sole goal is to enhanced local currency purchasing power and better exchange value against foreign currency’s. Sadly, the our case has not been so, particularly as naira keep getting worse in it exchange value.
In retrospect, the Obasanjo administration met the official exchange rate at N21.89/$1, it ended with N128.29/$1; under Yar’Adua
the official exchange rate moved from N128.29/$1 to N149.99/$1,
While the official exchange rate moved from N149.99/$1 to N196.95 under Jonathan, it galloped from N196.95/$1 to N461.06/$1 under Buhari government
Buhari left it for Tinubu at N461 to $1. We quoted official CBN rates above, by hesitating not to used the black market disjoined rate’s.
Moreover, our concern’s whether Tinubu’s FX unification will not end as farce monetary action,can be understood from the foregoing case of successive government , handling of our FX market before now.
Nevertheless, the the question now is, can anything be done to strengthened the naira? While forex unification as a monetary reform or what Tinubu himself referred to as ‘House Cleaning’ of the CBN not end in farce.
The answer is yes, definitely, many Nigerians seem to show interest about the policy, at the same time questioning the capacity to sustain it implementation.
Because, one thing is certain, forex unification as a monetary reform must be accompanied by a series of economic reforms. Even though it is a mark toward the free market. Critically, no monetary change is possible without slashing public expenditure, investing in concretes infrastructure, deregulating the economy, and cutting multiple taxes. If not, this would just be transitory measure, that when pull become push,it could ultimately revert into economic mess.
Another, is how prepared his Tinubu to shore up the nations foreign reserve. Although many are suggesting $60billion reserve would gladly make a difference. For us, so far the four (Crude oil proceed, Diaspora remittances, Export proceed, FDIs/FPIs) major sources feeding the reserve enjoy steady in flow.
Nonetheless, the uncertainty in the global economy, particularly crude and commodity market. Not to forget the trade war between US and China, risen debt, tariff debacle and risen interest rate commotion in Europe and the escalating Russia and Ukraine war disrupting global food supply chain. And the global battles against inflation that has further deepened poverty in Africa, and other part of the world.
Need to be watched closely, because on the short and long run would significantly mark up the price for liquidity and dollar availability. With point and indication of where the true equilibrium between to influence the ‘Willing Seller’ and ‘Willing Buyer’ demand and supply equilibrium or not. As conditions to sustain FX unification,while failure to strengthened the naira through production would worsened it.
We are not doubting President Tinubu position on all these, rather we are asking for clear positions on concrete issues. Because a modest history of our economy shows politicians always positioning themselves on the road side of compromise. As German economist Thorsten Polleit once said “all of us are corrupted collectively” in regards to compromises.
Adefolarin A. Olamilekan