The Democratic Peoples Congress DPC, has called on the Governor of the Central Bank of Nigeria, Godwin Emefiele, to resign following the declining state of the Naira and the Economy. The party’s position is contained in a statement released by the party’s Chairman, Reverend Olusegun Peters on Friday February 19th.
“The Central Bank of Nigeria under Emefiele’s watch is confused and overwhelmed by the country’s economic downturn. His trial and error policies in recent times are classical example of voodoo economics, if not economic terrorism. “We demand his immediate resignation and re-organization of the apex bank for effective policy formation and implementation that will stimulate the national economy and steer it on the path of growth, development, advancement and prosperity. “The present crop of top CBN officers are suffering from leadership fatigue and ignorant of effective strategies to evamp the economy and restore the value and dignity of the nation’s currency, naira. “It is time for all patriotic Nigerians to stand up and be counted in the efforts to overhaul the economy and save the naira from further depreciation,” the party said.
How to save the naira
With the naira exchanging for as high as N400 to the dollar in the parallel market, the nation’s currency, no doubt, has hit an all-time low.
The naira on Thursday weakened by N40 or 11.11 percent against the dollar as it closed at N400/$ during the day compared with the N360/$ it closed the previous day at the parallel market. Further investigation indicated that the naira later closed at N389/$ following some resistance from customers.
At the autonomous market, the local currency lost N28.50k or 7.96 percent against the greenback, closing at N386.50k/$ on Thursday from N358/$ the previous day.
It depreciated slightly against the dollar by N0.01k or 0.005 percent at the interbank foreign exchange (FX) as it closed at N199.35/$ on Thursday, as against N199.34/$ the previous day, data from FMDQ revealed.
However, the CBN’s clearing rate at the interbank market on Wednesday remained unchanged at N197/$, data from FMDQ indicated.
But analysts say the immediate measure to the current situation is for the apex bank to relax some of its forex rules, otherwise the local currency would continue on a free fall.
Johnson Chukwu, CEO of Cowry Asset Management Limited, said the FX policy of the government tended to be nationalistic rather than economic.
Chukwu was concerned that the country had built up demand for forex, which had been shifted to parallel market, adding that the black market had become the ruling market for importation of goods.
He said the country’s potentials were still intact while the policies had kept investors away, adding that the country was doing demand management while supply management suffered.
Experts’ recipes to salvage the naira
Renowned economist, Dr Ayo Teriba, said the fall in value of the naira is attributable to the inability of the country to attract Foreign Direct Investment (FDI) in critical infrastructural sectors. Much as he agreed the fall in oil prices contributed to the slide, he said Nigeria should have cushioned the effects by offering some of its shares in the wholly owned parastatals to foreign investors.
According to him, “If you look at the oil and gas sector, you find that the government is still in charge of many sub-sectors 100 percent.
“Our refineries are still owned by government 100 percent. If we sell off a part of our owning, we will attract dollars to the economy because it is a dollarised sector. We own pipelines 100 percent too. We have to consider shedding some of those shares to earn foreign exchange.
“Look at the power sector too. The government is wholly in charge of generation and transmission. Many foreign countries want to get involved but we are shutting them off. If we allow them in these areas, they will bring dollars and also develop infrastructure for those areas.”
Teriba also said the rail sector offers veritable opportunities for the country to attract FDI and earn dollars. “Rail is particularly an interesting area we should consider. If we bring in foreign sectors, we can get dollars in circulation in return and they will build infrastructure.
“The era of keeping everything to oneself is over. Government has to start allowing FDI to boost and galvanise the economy,” he explained.
He pointed at Saudi Arabia, which offered 10 percent of its national oil group, Saudi Aramco, through Initial Public Offer (IPO) that fetched over $1billion just last month.
The economist said many of such investment opportunities exist for Nigeria to explore to attract immediate dollar supply to the economy.
He said more joint ventures such as the Nigeria Liquefied Natural Gas Company Limited (NLNG) should be generated for the country to earn greater foreign exchange.
Teriba added that the many foreign trips of President Muhammadu Buhari should start focusing on how to convince the Diaspora Community to invest back home.
He noted that China and India have made over $30billion investments through Diaspora investment, saying that Nigeria has the capacity to even attract more.
“We have many people in the Diaspora. It is high time we preached to them to start repatriating some of their earnings and investments through provision of some incentives,” Teriba stated.
This, he said, will help to increase dollar supply and provide liquidity that will galvanise revival of the economy. The best part is that there is no way such investments will not lead to employment. The more employed people we have, the better for us.”
The President Association of Bureau De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, said government must consider strategic partnerships with focus groups, like his, to save the naira from further slide. He said all those involved in the supply market should be engaged against speculative activities in the sector.
He said the rationing approach to dollar supply has been responsible for the naira’s slide. Gwadabe hinted that the association has submitted proposals to the Federal Government on how to partner for National foreign reserves with monetary regulators.
He debunked insinuations that the activities of operators were responsible for the shortfall in dollar supply, saying the group has been identified as having just five percent participation in the currency market.
“How can we be responsible when we cannot access dollars ourselves? CBN, banks and oil companies are not selling to us. We have had to go out of our way to create windows for supplies of foreign currencies. As retail solution providers, we have done the best within our reach to boost supply and ensure circulation in the market.”
The Director of Lagos Business School, Prof. Pat Utomi, believes high cost of governance and poor local productions are responsible for the woes of the national currency. To reverse the trend, he said Nigeria must either increase local production or reduce public spending to only critical segments of the economy.
According to him, “It is simply a function of increasing local production and reducing costs of governance. You can’t be talking about reviving the naira when senators are planning to buy vehicles. Will buying those vehicles boost the economy?”
Going down memory lane, Utomi, a political economist recalled that: “In 1976, former Head of State Olusegun Obasanjo insisted that government officials must only use 404 vehicles, including himself to save costs. We have to go the same way again and spend only on the productive sector to galvanise the economy.”
On the forex restriction policy, he said: “Did the restrictions inspire confidence or fear? It is about the psychology of players. When the restrictions came, many of them lost confidence and withdrew their investments from the economy.
“We didn’t show to the investing community that it was a temporary measure that will soon be relaxed. Many of them didn’t get that feeling and left.”
On whether the naira value can increase considering the slide, Utomi said: “Everything that goes up can come down. It depends on how and when.”
Quick fix by the CBN needs
In the view of Prof. Sheriffdeen Tella, who is professor in the Economics Department of Olabisi Onabanjo University, Ago Iwoye, Ogun State, at the centre of the crisis bedeviling the naira is the issue of speculation by bureau de change operators and their cohorts in the banking sector.
Speaking with The Nation at the weekend, Tella who is the former Vice Chancellor of the Crescent University, holds the view and very strongly too that one best way to address the drift of the naira is for the Central Bank of Nigeria (CBN) to change the colour of the two highest denominations in the local currency.
“For quick fix, if the CBN can change the colour of the N500 and N1, 000, it will make a lot of difference because that’s what they use. The mere announcement by the CBN that it wants to change the colour of these two denominations of the naira that is N500 and N1,000 will send panic and warning out there because what is driving the unprecedented fall of the naira is speculation by the BDCs who desperately want the CBN to reverse the ban on forex sales to them.”
While noting that those who are selling the forex are all around the West African sub-region, as such, the flow of forex into the country is quite easy because those who have stashed the money in their homes can afford to sell at any amount without losing anything, he is however optimistic that if the activities of the BDCs are contained, it will be in the best interest of the economy.
“Besides the CBN should try to reduce the activities of the BDCs as well as the black market because oftentimes you find that those who operate the BDCs are also involved in the black market. So they just buy forex at the official rate and simply sell it at the black market. So one way to stop the round tripping is to make sure the activities of the BDCs are closely monitored by all means as well as discouraging the black market from operating in the first place.”
He is also vehemently opposed to the devaluation of the naira for a number of reasons. “I don’t support devaluation of the naira. I would rather we allow the market forces to determine the gradual rise of the naira. What depreciation will do is what devaluation will do but it is different when you allow market forces to interplay. It is more cumbersome when you devalue because when this happens it is almost impossible to revamp your currency. But when the currency depreciates as it is now once you allow market forces it is more practical for the currency to regenerate.”
Like Tella, renowned economist, Mr. Henry Boyo is also does not want the Federal Government to contemplate devaluation of the naira, stressing that a 50 percent fall in value would severely deplete all Naira income values and induce panic among naira income holders.
“Sadly, such response will simply instigate more dollar demand in the open market”, he argued, stressing that ultimately, if Central Bank of Nigeria(CBN) is unable to restore public confidence to the naira which is a store of value, another widening gap will once again evolve between official and parallel market exchange rates to make further serial Naira devaluation inevitable.
Citing an example of the Ghanaian, which he said followed a similar trajectory from 1 Cedi = $1 to eventually exchange for 10,000 Cedis before the redenomination of the currency in 2007, noted that the Ghanaian authority failed to control excess Cedi liquidity, adding that it is inevitable that the new Ghana Cedi now trades at about 40,000 old Cedis, that is 4 New Ghana Cedis to a dollar.
“Consequently in 2015, the IMF sadly had to provide for over $900m emergency loan so that Ghana could reduce the huge capital market deficit in dollar supply and hopefully protect the Cedi exchange rate; regrettably, the end of the travails of the Ghanaian currency is still out of sight,” he said.
While appraising rent initiative by CBN, Boyo said its stranglehold monopoly on the forex market will invariably reduce the persistent, self-induced challenge of excess Naira liquidity, which he said overwhelms CBN’s regular auctions of dollar rations, “and the Naira exchange rate will become stronger”, he assured.
Speaking further, Boyo said: “Clearly, Godwin Emefiele, must also be concerned that the fortunes of the naira do not mirror the story of the CEDI; indeed the forex controls that CBN announced in January 2016 are clearly foraging attempts to protect the naira value and thereby save more Nigerians from falling below the poverty benchmark. The million naira question, however, is whether or not CBN’s policy control measures can effectively reduce dollar demand pressure and stablise or indeed improve the Naira exchange rate?
“Nonetheless, in his defence of the ban of almost 3000 Bureau de Change from official forex allocations, Emefiele, expressed grave concern that BDC operators had abandoned the original objective to serve retail end users who need $5000 or less. Conversely, according to Emefiele, “the currency dealers became wholesale dealers in foreign exchange to the tune of millions of dollars per transaction” and then “criminally, thereafter used fake documentations, such as passports, etc to render weekly returns to CBN.” It is not clear how much tax was generated from these mega transactions.”