MANDATORY CURRENCY DEVALUATION RUINS A NATION
Francis E. Ogbimi canvasses a fixed exchange rate, intensive learning and industrialisation
Nigerian intelligentsia and intellectuals hitherto, lacked the competence to assess an economic programme. All development programmes implemented by Nigeria since independence have always been conceived in Britain and America. Nigeria began with National Plans 1960-1985, then the Structural Adjustment Programme (SAP) 1986-now. The sad thing is that though the West is technologically advanced, it still does not understand the human development process. So, the West cannot and should not conceive a development programmes for Africa. The programmes conceived in the West for Africa usually lack growth-promoting elements. They always promote unemployment, poverty and abstract and fruitless arguments. Africa would not have adopted the plans conceived the national plans and SAP had Nigerians had the competence to assess a development programme.
The Naira exchanged 194 units to one Dollar in the official market up to the month of May 2015, it is exchanging about 500 Naira to the Dollar today. Is the devaluation of the Naira the way forward for the Nigerian economy? No! Mandatory currency devaluation ruins a nation; it is not the way forward for any nation. The Nigerian Foreign Exchange market today was the Mandatory Foreign Exchange Market that was introduced to Nigeria as part of the SAPs introduced to indebted African nations by the World Bank and IMF in the early 1980s.
A mandatory devaluation is one forced on a nation under the pretext that the nation is under the pressure of scarcity of foreign currencies. Germany was the first nation to be forced to adopt the German SAP in the period 1919-1923. The World Bank and IMF did not exist then. Germany as the leader of the Axis powers lost World War I to the Western Allies. The Allies demanded $33 billion from Germany as war reparations. Germany could not pay. Consequently, the Allies forced Germany to sign the Versaille Treaty, which contained the mandatory currency devaluation progamme. That was the German SAP.
The German Mark had exchanged 4.2 units to the Dollar in 1918 at the end of the war. The German SAP started in 1919. One year into the German SAP, 1920, the German Mark exchanged for 63 units to the Dollar. In 1921, 200 Marks exchanged for one Dollar. In 1922, 2000 Marks exchanged for one Dollar. By 1923, the German Mark collapsed, 4.2 trillion Marks exchanged for one Dollar. The German economy was destroyed. Though Germany was a world power, the Germans and Germany were humiliated.
The Nigerian SAP which began in 1986 was forced on the nation because Nigeria indebtedness to foreign creditors. The Nigerian experience 1986 to now may be reported as follows: In 1985, the Naira was equivalent to 112.4 Cents. In 1986, one Naira exchanged for 49.5 Cents. In 1993, the Naira exchanged for 4.5 Cents. In 1998, one Naira exchanged for 1.2 Cents. In 2004 the Naira exchanged for 0.7 Cent. The Naira exchanged for 0.5 Cent in 2015 and today the Naira is exchanging for 0.2 Cent.
Could the Allies have introduced German to the German SAP to strengthen Germany economically and the German military at the end of the war? No! The humiliation of the Germans and the destruction of the German economy were evident immediately and at the end of the punitive programme in four years. It is the reason the first Woman Prime Minister of Britain, Baroness Margaret Thatcher, once said that when you want to destroy a nation, first, you destroy the currency. It is the reason Britain always defends the Pound Stirling.
The German people rose, abandoned the German SAP and restored their honour. The Commissioner for National Currency, Hjalmer Greecy Schat promptly stopped printing the mark and issued a new currency (the Rent-mark) that was equal to one trillion old mark and restore the exchange rate of 4.2 Mark to the Dollar. WW II was probably caused by the German SAP. John Maynard Keynes had warned Britain to be ready for WW II if it signed the Versaille Treaty. Why would the West subject Africa to SAP again? Was it for lack of a sense of history or wickedness?
Economists, accountants and bankers do not understand how the economy works. They lack a sense of history and do not understand the science of sustainable economic growth, industrialization and development (SEGID). They are only good at sustaining abstract and irrelevant arguments about the economy. Africa will stagnate as long as economists and related institutions like the World Bank and IMF continue to influence the planning in the continent.
Economists and related institutions claim that irresponsible devaluation will lead to market-determined exchange rate, make the Naira a convertible currency and promote inflow of foreign investment into Nigeria. What became the market-determined exchange rate for the German Mark, the currency of a world power in the period 1919 to 1923?
The Nigerian SAP has sapped and disgraced Nigeria for 35 years. The convertibility of a currency is not achieved through mandatory devaluation. A convertible currency is one owned by a productive nation. It is the currency of an economy which produces a non-negligible proportion of the total quantity of goods produced in the world in a year. The American Dollar, the British Pound and the Japanese Yen are convertible currencies because the United States, Britain and Japan, each produces a non-negligible proportion of the total quantity of the goods produced in the world in a year. Hence many nations which buy the goods need Dollar, Pound and Yen to pay for them. The Nigerian Naira exchanged 112.4cents in 1985 and exchanges 0.2 cent today. The Naira has been devalued 99.8 per cent and the economy has been ruined.
So, what is now the way forward? Learning (education, training, employment and research) is the primary basis of achieving SEGID in a nation. Capital investments, including foreign investments do not promote SEGID. So, no wise nation destroys its currency to attract foreign investments. No one has been learning since the Nigerian SAP began in 1986. The apprenticeship system is dead in Nigeria. Usually, the currency of a nation serves as a means of exchange. Mandatory devaluation destroys the production system of a nation by drastically increasing speculation in the nation and making the destroyed currency and foreign currencies tradable commodities. In Lagos and many other towns in Nigeria, you hear of dollar-pound, dollar-pound, like buy guguru/epa, akamu and akara. The youths are either selling imported articles in the streets or riding motor cycles to eke out a living or idle. Production has been dropping since 1986. So, unemployment has been increasing, true inflation, poverty and insecurity have been increasing. SAP was introduced to humiliate Nigeria and other African nations. A nation with an agricultural economy is necessarily poor. To subject an artisan/agricultural nation to SAP in wickedness.
The way forward is to abandon SAP, adopt a fixed exchange rate, focus on intensive learning and industrialisation. Nigeria should mobilize all her citizens for learning as Japan did 1886-1905 and China did 1949-early 1980s and achieved rapid industrialization.
Prof Ogbimi, email@example.com