James Emejo in Abuja and Nume Ekeghe in Lagos
The West African Institute for Financial and Economic Management (WAIFEM) and some other industry stakeholders have kicked against the planned bid by the governors of the 36 states of the federation to demand that their shares and those of the local governments of monthly allocation from the Federation Account should be given to them in dollars.
Speaking in separate interviews with THISDAY, they said the move by the state governors did not make any economic sense and would resort to volatility in the system.
THISDAY last week reported exclusively that worried by the intractable problem of fuel subsidy, which had affected the amount of money available for distribution among the three tiers of government, governors of the 36 states of the federation were mulling presenting to the federal government a demand for their shares and those of the local governments from the Federation Account to be given to them in dollars.
One of the governors had confided in THISDAY that their efforts to resolve the issue so far had failed to yield any positive result due to push-back from some federal government officials, who believed a full deregulation of the downstream sector of the oil industry, which would lead to uncapping petrol price would be injurious to the poor, whom President Muhammadu Buhari has vowed to protect from the vulnerabilities of the nation’s economy.
But in an interview with the Director General of WAIFEM, Dr. Baba Musa, on the sidelines of the ongoing IMF/World Bank Annual Meetings in Washington, he said the governors’ push was uncalled for as the country does not operate dual currency.
He also warned that the move would result in volatility in the budget.
He said: “When I learnt that state governors want to make case that since we earn income from oil in dollars and because the constitution says that whatever we earn should be shared among the three tiers of government, so they want their money to be paid in dollar, that doesn’t make sense at all and that is not the standard practice in any nation.
“The only country in Africa that allows dual currency is Liberia and even Liberia, is presently working towards having a single currency as a medium of exchange. So, do you ask the states to start preparing their budget in dollars? That’s the first question to ask. Do they make their spending in dollars? That is the second question to ask.”
Musa added that since states don’t determine the exchange rate, they have no control over the determination of exchange rate, which is the exclusive responsibility of the central bank, their demand would not make any economic sense.
President of the Chartered Institute of Bankers of Nigeria (CIBN), Mr. Uche Olowu, described the governors’ move as unpatriotic and unhealthy for the economy.
He said: “I do not think it is healthy for the economy. Is the dollar the legal tender in the country? Will the American government want the naira to be paid as legal tender? That is not patriotic as far as I am concerned.
“The naira is the official tender and so if there are any trades and all that, the allocations continue to be in naira.”
Also speaking on the issue, an economist and financial analyst at the Abuja Leasing Company Limited, Mr. Ibrahim Shelleng said he would not encourage the federal government to pay the states in foreign currency as this could result in the economy being awash with dollars.
“They should continue to receive payments in naira to prevent states becoming BDCs. There are two sides to it. From the states point of view, they would prefer in dollars; so, they don’t incur exchange losses.”
Another economist and former banker, Dr. Chijioke Ekechukwu, told THISDAY, the move by the governors would be “the worst mistake the federal government will make” should it yield to it.
He said such a move could result in undermining the naira, which will ultimately weaken the local currency.
He added that the move could further make it difficult for the Central Bank of Nigeria (CBN) to meet funding needs for imports among other obligations.
“It will be absurd for the federal allocation to be paid in dollar to states. How can our currency be so neglected and undermined? The economic effect is that our naira will automatically be devalued without any prompting. CBN will no longer meet its funding needs for imports and other obligations,” he added.
Also, a senior lecturer in the Department of Agricultural Economics and Extension, University of Port Harcourt, Dr. Anthony Onoja berated the governors over the planned move.
“Any move by governors in Nigeria to receive their share of federal allocation in foreign-denominated currencies whether in US dollars, Great Britain pounds or euro, is totally wrong and flawed technically.
“Such a move connotes admission of total failure of naira as a national currency by Nigerians themselves and will definitely weaken the value of naira furthermore in relation to any other currency in the foreign exchange market,” he said.
But the Head of Research at the United Capital, Mr. Wale Olusi, backed the governors’ move, saying: “I can’t blame them. I would ask for the same thing if you have a currency market where the naira exchange for the dollar at N305 in one segment and over N360 in another. I will ask for my dollar and exchange to naira at N360+ rather than be short changed by the CBN at N305.”
Data from the CBN showed that in 2018, Nigeria netted a total of N5.54 trillion from oil revenue.