Appreciation, Not Guillotine for Emefiele

Appreciation, Not Guillotine for Emefiele

PERSPECTIVE

Louis Achi

For a stuttering dollar-denominated, consumption-driven and almost solely petroleum-funded economy as well as a misunderstood role of central banks the world-over, recourse to attacking the candid intentions of the Central Bank of Nigeria’s (CBN) Governor appears a logical fair game. But a more rigorous, logical analysis of micro and macro-economic dynamics in a national economy suggests this is totally wrong. Here is why.

As at when the media briefing was held by the CBN Governor, Mr. Godwin Emefiele, the naira was at about N560 to a dollar on the parallel market. This apparently and curiously was the key trigger for calling out Emefiele and setting him up for the guillotine.

Certified Financial Engineer/Investment Banking Executive – Dr. Nnaemeka Onyeka Obiaraeri – also Managing Director/CEO of Taurus Capital & Advisory Services Limited, the Investment Banking business of the Taurus Group cuts to the heart of the matter when he held that all the major causes of our economic woes are fiscal and falls within the direct responsibilities of the National Assembly, the Presidency and states.

Just within the half year of 2021 alone, the country spent over N1.47 trillion on the importation of petrol alone with the cost of subsidy on this item nudging almost N750 billion. When the import cost of the gasoil, DPK, and other mineral oil is added, the import value of the white petroleum products may hit a half year value of over $5 billion and $10 billion by year end.

Nigeria which expends this huge volume of dollar importing petroleum products against all superior reasons and common sense.

Its common knowledge that Nigeria with an arable land mass of 64 million hectares and working population of over 110million still fritter away over $11 billion annually importing food and food-related commodities that can easily be produced here. On this particular score, Emefiele has shouted himself hoarse and deployed successive intervention programmes to roll back the trend.

Part of the reason for this quagmire of avoidable food commodity import is because able-bodied adults cannot go to the farm due to the bloody rampage of rogue herders and bandits, who migrated from outside the country. These killers, alongside Boko Haram and ISWAP have made the land very insecure for farmers to go near their farms.

More, at every month end, grasping, greedy politicians will enthusiastically convert the large cache of naira they corner every month from shared Federation Account Allocation Committee and other internally generated revenue into dollars at the parallel market at whatever rate they can lay hand on, thereby putting more pressure on the exchange rate. Because the nation’s education system and health services are decrepit, most of the elites have flown their families abroad for comfort, security, education and medical tourism. This also adds even more pressure on the foreign exchange market.

Even before the slump in crude oil receipts, Emefiele had spoken unendingly warning citizens to change their lifestyle of living off imported and exotic items. He had contended that for every imported item we indulge in takes a toll on the nation’s foreign reserve. Significantly, he took specific steps to staunch the leakages.

Worse, the nation’s only source of major dollar earnings, petroleum is in low demand globally. Unfortunately, even earnings from oil and gas cannot cover 20 per cent of our dollar demand in the land.

Most foreign direct investors, Diaspora Nigerians and those, who would have brought in dollars, are staying away from the country. Due to the naira’s free fall, even private sector entrepreneurs are hedging their savings in dollar and other safer assets because none knows the fate of the country. People are scared that the burst may happen soon because of the appalling state of insecurity in the land.

Emefiele had moved against dollar merchants and shut down the illicit business of forex speculators. Entrepreneurs who apply and obtain dollars for production of tomato puree end up importing same.

Some of those who obtain forex to import machinery to boost rice production, using their farms as fronts and collateral, end up allegedly deploying it to import cars and rice. For these categories of forex speculators, Emefiele was strictly bad news. Emefiele’s bold positions were and remain salutary business for the country and her citizens. It is also worth noting that strident criticisms against the CBN boss considerably scaled up after his deserved reappointment by President Muhammadu Buhari for another five years.

Persons who worked so hard to kill the local industries like the once booming textile industry, agriculture especially grains production, fertilizer production among other items that could easily be produced at home, were angered that Emefiele was reappointed for yet another five long years. Now they are baying for his blood.

Putting up with Emefiele’s fiscal responsibility demands is clearly unimaginable for them. So, they must discredit the man and his mandate. Many Nigerians know that without Emefiele’s ban on the importation of over 40 items some years ago, the nation’s foreign reserve would have been completely depleted. His insistence on local production ensured that an assortment of locally-produced rice graces our tables today.

His compelling foresight in banning these items, ensured remnants of our textile factories still exist. His firm restrictions in forex allocation, his preference to finance production rather than consumption has ensured the current revival in the textile industry, agriculture value chain and drastic reduction in importation of grains from all over the world.

Emefiele had last Friday vowed the apex bank would track down and bring the founder of AbokiFx, Mr. Oniwinde Adedotun to book for alleged speculative activities on the foreign exchange “which amounted to economic sabotage.”

According to Emefiele, Adedotun had been conducting nefarious and criminal activity on the Nigerian economy by indulging in forex speculation in contravention of the CBN Act, which vested the apex bank with the sole responsibility for determining the rate of the Naira.

Significantly, Emefiele has received the backing of former Deputy Governor of the Central Bank of Nigeria (CBN), Dr. Kingsley Moghalu, who recently affirmed that currency speculators’ attacks affected the value of the naira.

Moghalu, who was a deputy governor at the apex bank from 2009 to 2014, wrote on his Twitter handle that speculation affected the naira value,

He stressed that there, “are currency traders around the world for whom the weakness of a currency is their very good fortune” disclosing that such traders ‘attack’ such currencies for profit, especially where the currency is using a fixed, official exchange rate determined by the central bank instead of the market.

He listed factors that affect the value of the naira to include, “supply and demand (if too much naira is chasing scarce dollars, the dollar gets stronger relative to the naira, and vice versa). Others are inflation (a high inflation economy such as Nigeria’s weakens the value of the legal tender), high government indebtedness again, our case especially relative to our revenues and ability to pay which will be stretched the more we borrow on poor revenues, and 90 kobo out of every N1 goes to debt servicing).”

Though the former deputy governor did not mention Aboki FX, he said: “As the naira is effectively pegged officially to a ‘reserve’ currency (dollars, euros, pound sterling), speculators can attack such a currency for profit if the country (Nigeria in this case) is perceived to have insufficient foreign reserves to meet demand.

“Because our inflation rates at 17 per cent are way higher than those ‘reserve-currency’ countries, again we are exposed to possible currency attacks. If reserves are weak, and demand for dollars massively outstrips supply, currency devaluation is inevitable, and currency traders who mount speculative attacks profit from this devaluation.

“Such traders will borrow the naira from Nigerian banks; convert it to, say, dollars, and then buy short-interest paying Nigerian bonds. If, as the speculators anticipate, the central bank devalues the naira, the traders sell the bonds in the foreign currency, convert them into naira, and repay their original loan. The steeper the devaluation, the higher the speculators’ profit.”

Moghalu also recommended that one of the best ways to strengthen the naira is to make the, “right trade policies to support and create such incentives for massive exports of finished, value-added goods from Nigeria.”

Beyond the complex economic analysis, every Nigerian should of necessity do self-examination. It’s no secret that when banks provide dollars for travellers (BTAs o $4000), the same Nigerians who are criticising Emefiele will go and book flights – some will even use fake tickets – go change the money in the black market and smile home. Some who use genuine tickets have them cancelled.

It bears repeating that today a lot of Nigerian families have one relative or kid schooling abroad and pay their fees from here. Nearly all government officials have their children schooling abroad. From Local Government Councillors right up to the federal level – ministers, DGs, MDA hierarchs and even assistant to councillors train their kids abroad.

Today Nigerians who send their kids abroad have quadrupled. The numbers of people who go on medical tourism have quadrupled. And yet the nation’s product for earning this forex is largely crude petroleum.

All the dollars are being sourced locally. A subsisting situation where the country earns 90 per cent of her forex from oil hardly helps matters. In some quarters, Nigeria does not even meet her OPEC oil quota. The foreign reserve is very low. Worse, a country that does not produce or manufacture anything, but consuming from all cylinders would hardly have a competitive currency.

Previously, people travel abroad and send forex back home. Although this trend still continues to some extent, but currently people travel abroad and money is being sent to them from here.

Medical tourism is blossoming. Nigerians travel out in droves to cure headaches and even have sauna bath to booth. Some families travel to the US to take vaccine – something they could have done locally. They source the forex locally and fly out. All these weigh down the Naira value against the dollar.

Simply because Emefiele banned forex to BDCs – some of whom had been established as terrorism funders in Nigeria, they have moved against the CBN boss. The CBN boss deserves appreciation, certainly not the guillotine.

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