By Yohanna Ibn Sarki
I will like to draw our attention to the state of our economy and the need for us to jointly and proactively take steps that will stabilise this economy for sustained growth. This is to ensure would-be investors see the potentials in our great economy and have the confidence to once again invest in Nigeria.
Over the years, we have witnessed several administrations’ attempt to revamp the Nigeria economy with promises of hope and return of our dear Nation to prosperity, peace and unity. However, the only thing we have witnessed as Nigerians is continual decline in the value of our currency with resultant negative effect on the economy and quality of life for our citizens. More than these, many now lack confidence in the Naira and we have gradually become a dollarised economy both in spending and savings. Each of the previous administrations came with its own “maverick team” with high sounding profiles and claims that we now have the right Messrs. FIX IT who will make things work and put Nigeria back on the right track. They are showered with encomiums and they flaunt their pedigree on the successes they have achieved in the financial and business environment. Unfortunately at the end of every administration, the new administration comes up with woes of how the economy had been mismanaged by the previous administration. Then, the cycle begins again. After all these years of different Messrs. FIX IT, we are yet to see sustained policies or reforms that can give us the much desired growth and stability in the country.
Permit me to buttress my point with the reality of the Naira today. I will be speaking in plain economic terms for ease of understanding and to enable persons without economic knowledge engage in this discussion. Many have argued that our trade deficits have been responsible for the continual decline in the value of the Naira. This has not really been the case as you will observe reading further. In 2003, the average value of the Naira was N120.5 to the dollar but dropped to N165 to a dollar in 2014. Meanwhile, Nigeria maintained a positive trade balance through these 11 years, with the 4 highest being $86.12 billion in 2012, $41.26 billion in 2011, $39.26 billion in 2006 and $35.79 billion in 2008. Yet, with these positive trade balances, the Naira lost N45.00 in value to the dollar. In comparison, Pakistan’s Rupee was PKR 57 to the dollar in 2003 and like the Naira, dropped to PKR 96.18 in 2014, which is a difference of PKR39.18 (N62.89 using October 2014 rate) loss in value. Contrary to Nigeria’s situation where we had positive trade balance, Pakistan had negative trade deficits throughout these years with an average of -$12.54 billion and had a peak of -$18.42 billion in 2008. So, what exactly are we doing wrong, Today, the Naira is fluctuating at an average of N1,200 plus to a dollar while the PKR is about PKR 277.94 to a dollar, meanwhile, Pakistan has historically always had higher trade deficits than Nigeria, with average trade deficit of -$38.6 billion in 2022 and -$24 billion in 2023 while Nigeria had -$7.96 billion (World Bank data) in 2022 and maintained an average positive balance in the year 2023 (yet to get complete statistics for the whole year), yet our currency is still devaluing by the day. I know economists may begin to postulate different theories. While trusting in the collective wisdom of our economists and technocrats, something is evidently wrong.
You may recall, in the early days of the last administration when there were clamours to allow the Naira float freely, most of our erudite economists made us believe that the declining value of the naira against the dollar would only affect imported goods and not local products. But we have seen today that even the mango that is plucked from the village is impacted by the value of the naira against the dollar when it gets to the market. The vehicle used to transport the goods from the village, cost of spares and fuel are funded in USD and have direct impact on the overall value of the mango. The implication of a devaluing currency is that it impacts on the cost of governance and the living standards of every citizen as well as the perception of real foreign investors, not portfolio investors who mainly take advantage of our weak institutions to make mega figures in profit.
Take, for instance, the Government embarked on a $1 billion project in January 2021 when the dollar was $1 – N381 and the project was meant to be implemented within 3 years. The total amount required for the project would have been N381 Billion. Assuming the Government had managed to settle 68 percent (68%) of the contract value and 22 percent (32%) of the contract, amounting to $320 million, was required to complete the project in the year 2024. Going with the average of $1 – N1,200.00 today, the sum of N384 billion would be required to completed just about 32 percent of the project, which is N384 billion more than the original contract sum. This clearly reveals that the cost of governance would have increased astronomically with huge costs on contract variations. Investors would also have shared in the same experience with most of their profits lost to the devaluation. Imagine a Nigerian that had saved over N100 million in 2023, the present purchasing power today is less than N40 million of its value when it was saved. The summary is that a stable economy benefits everyone.
Unfortunately for us as a nation, while we have kept our eyes fixed on the dollar and we keep making one excuse or the other for the decline in the value of our currency, the currency of our neighbours, who are not reckoned as key players in the world economy, has suddenly caught up with the Naira and surpassed it before our very eyes. The CFA that used to exchange for about CFA25 to a naira in 1999 is now almost N2.00 to CFA 1. Meanwhile, the countries in the West Africa CFA region have consistently had negative trade balances through all these years. The implication is that our neighbours have grown richer than us, though, we seem to have more development and wealth. For instance, minimum wage in Benin Republic as at April 2023 was CFA40,000.00 which was just about N1,600.00 in 1999 (CFA25 – N1) and N13,300.00 in 2021 (CFA3 – N1). Today, CFA40,000.00 is almost N80,000.00 as at 13 April (CFA1 – N1.95). Meanwhile, minimum wage in Nigeria is still N30,000.00 (about CFA15,000.00) which a lot of states are unable to pay.
No doubt, the dollarisation of our economy, financial recklessness and high handedness of civil and public government officials in collaboration with dubious private institutions has brought us to the present state we have found ourselves today. Presently, the Naira which used to be loved by our neighbours is no longer being accepted because of its instability. More than these, we are paying a lot more for international transactions than other countries. For instance, the cost of travelling from Johannesburg to London, which is 11 hours 30 minutes is less than half the price of travelling from Abuja to London which is about 5 hours 45 minutes. Some Nigerians travel through Ghana because it is a lot cheaper. Today, we can’t even find pricing for Nigeria on most online portals for goods, services requiring foreign/international online payments, meanwhile, countries like Benin Republic, Ghana etc can be found on such portals. Our resources are being depleted daily and there is a need for us to arise to the realities of where we really are today. Obviously, Nigeria is not where it ought to be. Some nations with less human and economic resources are doing better us, most of us have travelled round and know what I am talking about. My conclusion is that, the problem of our economic woes is more about improper financial management rather than insufficient dollar funding.
I believe that beside the security challenges that we have on our hands today, which the Government is working seriously to address, we also have an economic challenge that needs to be taken seriously. As a nation, we have to take strong decisions, strengthen our institutions by putting policies in place to check leakages in the country and block economic saboteurs both in the government and private sectors. It may require taking a honest look at what we are doing wrong which others are getting right. This may require us given up some of our rights, privileges to enable us strengthen identified weaknesses in our government and economic institutions. Like President Ahmed Bola Tinubu said during the opening ceremony of the just concluded Nigeria Bar Association Annual congress 2023: “to build a great nation, we must make bold decisions, even though it may be painful at the moment, it is not about you or me, it is about the generation unborn”. Securing the future of Nigerians also means securing the future of ourselves, and our children.
Having said all these, permit me to highlight some questions that bothers my heart and I feel could stimulate further discussions towards possible solution.
As a nation, we import, keep billions of dollars in cash which we continue injecting into the economy to supposedly defend the Naira. After all these years, what have we achieved and what do we really stand to achieve. These funds will still require being transferred outside the country and there is no way the cash we have imported can automatically convert to digital currency required for electronic transfer, even when we pray. The Punch Newspaper of 1 December 2022 stated that CBN injected $11.24 billion into the Nigerian Market within 7 months of the same year to defend the Naira. So this huge sums of cash brought into the country, where are they today? Nigeria is not a dollar spending economy, so why do we need this much cash. The question is, to what end is all these? If we learn from history that when you run parallel currencies in a country, the weaker currency always suffers. Thailand took the same approach in 1997 and paid dearly for it, though, maybe implemented in different ways. In the past, before we had a global banking network, it was acceptable to import travelers cheques or physical cash to make provision for BTAs and other sundry expenses, while other payments had to be done through wire transfers. With the global banking networks we have today, do we really need cash brought in these magnitude into the Country?
Secondly, the so called parallel market which was almost becoming the defacto CBN that determines the value of the Naira, who really are these faceless people? Where do they keep their monies? Do they have private banks not known by the Government? What instrument do they use to make their payments? Do they submit annual CAC returns that reflects the magnitude of their transactons? If their payments or transactions are made through sources abroad, then, it should not be impacting on our economy. Rather, it should affect the economies where the funds are being sourced and wired from. My other questions on this parallel markets are: when they carry out their transaction, does the CBN really know how much was sold? Who sold the money? What the money was bought for? And who bought the money? Answers to these questions might begin to help us unravel the mystery of the crashing Naira and we could come with a policy that the only time a revised Naira figure is announced outside the CBN, Nigerians need to have answers to these questions. Thankfully, the present Administration has been able to clamp down on the black-market traders and somehow is maintaining control in this environment. If not properly institutionalised through legislation, it is just a matter of time for them to get re-organized and re-emerge in another form.
Those in authority need to know that they have a collective duty to safeguard the future of all Nigerians by ensuring that when they leave the scene, the future of an average Nigerian child can be guaranteed regardless of class or tribe, and the children who are yet to be born and their own children and children’s children up to several generations. This should be the focus of strategic leadership. This is a clarion call to all esteemed Nigerians in leadership positions at Federal, State, Local Government and community levels as well as all patriotic Nigerians. We all need to come together and join hands, regardless of our political and ethnic background, to make our nation take its rightful place in the world where it really belongs. We have a nation, and that is the only reason we are here today, hence, we need to ensure everything possible is done to keep Nigeria alive. Those in leadership today, rather than look unto yourselves, please work together to stabilise our country and make sure it begins to move forward again. We have followed the textbook economics and several advise from other nations for some time now, we may need to look into the Nigerian problem, with a Nigerian mind and find a Nigerian solution that can work for us as a nation. As earlier mentioned, a stable Nigeria benefits everyone, and even more those in power.
Let me end by quoting a statement attributed to the elder statesman, Chief Obafemi Awolowo: “The children of the poor you fail to train will never let your children have peace”.
● Ekeji, a commentator on public affairs, lives in Abuja, sent this via WhatsApp
