finally caved in to the strident demands to let go
of the apex bank’s hold on the foreign exchange
market. The CBN document, ‘’Framework for Re-
introduction of Managed Float Exchange Rate
System” finally puts closure on the long-drawn
debate on what the value of the naira should be
and what role the apex bank should play in
determining its value vis-Ã -vis major international
currencies. By that, the 16-month-long
“managed” exchange rate under which our
currency, the naira traded at N197 to the US
dollar came to what is perhaps a long-expected
end.
Given the forces arrayed against Emefiele’s
Central Bank of Nigeria, the odds that the bank
could have held out came to one in a million. If
the apex bank had thought that the threat of
imminent depletion of the nation’s store-house of
foreign currency called for understanding, or
some drastic measures of sorts given thedire
economic circumstances, that view was
obviously not shared.
The story, as sold, is familiar: the market worked
best when allowed to allocate the resources.
Never mind that the resource is forex whose
inflow had come under intense strain as a result
of falling oil prices and a vastly reduced output.
Never mind that the Nigerians’ appetite for forex
as indeed for all manners of imports havegone
on the hyper mode – and this inexplicably. For
our hordes of portfolio investors, the club of
flight by night investors, the throng of airline
operators who insist on being on first line charge
on the increasingly limited reserves, the gospel
must be – relax all controls on forex market to
enable operators repatriate their remittance or
their capital as the case might be!
Trust our arm chair analysts noted for their
preference to turn logic on its head, the
argument went on and on that the restrictive
monetary policies of the apex bank were behind
the economy’s slowdown; that because the apex
bank refused to throw the naira to the hounds
was why nothing worked – or is working. For the
manufacturers who had all these years to
integrate their operations backward to gain long
term strategic advantage but chose to be hung
on imported raw materials, the problem was
Emefiele. The sundry importers who traded in
the 41-odd items declared ineligible by
Emefiele’s CBN, surely, the man was
insufferable!
In the end, it was sufficient to pretend that the
problem started yesterday; or that business could
go on as usual;that the stock of the reserves
which tumbled from $60 billion eight years ago
to $48.174 billion five years after and which is
currently down to barely $27 billion would
somehow self-adjust.
In the circumstance, the otherplausible argument
that the current forex restriction was borne of an
exigency – didn’t matter.From the delinquent
Broad Street actors to dwellers of the nation’s
decapitated industrial alleys, not forgetting the
agents of foreign capital for whom the extant
forex regime was sweet poison – all egged on by
the meddlesome undertaker, the International
Monetary Fund; the chorus was the same: the
extant forex regime had to go after which all
things are supposed to return tonormalcy! The
marketers, as they say in parliamentary lingo,
have it!
My bet: we have the coming weeks to find out
who is right or damn right myopic!
Now, let’s be clear – there is nothing mystical,
or if you like, esoteric in the value of a nation’s
currency.The conventional position is that it
reflects acountry’s economic base particularly its
ability to export and hence earn foreign
exchange.But then, such position also flies in the
face of other strategic considerations known to
influence the direction of currency movements.
On the first, it is not hard to explain that Nigeria
did well in the past only because the good
fortune of oil smiled on her: at a roaring oil price
of $100-plus per barrel for years during which
the nation’s foreign reserves threatened to burst
it seam, the naira could hold steady whether or
not the so-called non-oil sector performed. As
for the second, ask the Chinese;the Americans
and the Asiatic; these countries know better than
waste productive time debating whether market or
policy underlies their interminable currency wars!
They have been taught to not just to recognise
the forces of national interests at work or
playbut to be ahead of competition no matter
what!
What’s wrong with the extant restrictive regime?
Nothing – if you ask me – except that the
Buhari administration treated it as an end in
itself. In other words, those who accuse the
administration and by extension, the CBN of
being needlessly obdurate in resisting the earlier
call to let the naira float are right only to the
extent that it became a stand-alone policy. Don’t
forget the problem: forex was scarce and
supplyincreasingly finite; and what was available
was under the threat of depletion.
That takes us to the latest measures by the
CBN. To begin with, I find the whole exertions on
the value of the naira highlydiversionary. Again,
if you ask me, I’ll say that the debate stems
from a fundamental misdiagnosis of the problem.
Far from what appears to be the current
obsession with forex management, the problem,
more fundamental touches on the ability of the
economy to renew itself. As this column is wont
to say, the problem comes down to the tragedy
of a nation that relies on a single commodity for
all its forex; one that spends a disproportionate
chunk of its forex on imports.
As far as I know, there are two legs to solving
the current problem. The first part which is the
easier part isto curb the imports. That,
apparently was what the CBN attempted to do
when it precluded 41 items from accessing forex
through the official window. Unfortunately, in the
absence of a coherent programme of import
substitution either in the short, medium or long
term, the nation’s expectation of self-reliance
soon turned to waiting for Godot!
The lesson: Import restriction does not
automatically translate to a nation’s capacity to
produce the goods!
The other leg – which is the harder part – is to
produce for export. That obviously requires a
broad strategy – something far beyond the pale
of the current regime of naira’s floatation.
As for the winners of the latest CBN measures,
there is no prize for guesing: the club of
importers, currency speculators, portfolio
investors – of course, the airlines whose
equivalent of $500 million dollars cannot be
transferred under the extant regime; they will
surely be be happy. Dont’s ask me where it will
lead!
By the way, where in the world did the idea
come that a relaxation of forex rules will bring
the nation’s moribund factories to life?
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