Killing Nigeria with Multiple FX Exchange Rates

RingTrue By Yemi Adebowale

Phone 08054699539

I have spent quality time appraising and reappraising the International Monetary Fund’s Staff Concluding Statement on the 2022 Article IV Mission to Nigeria released nine days back. For me, the preliminary findings of the IMF Staff on Nigeria’s shambolic foreign exchange policy stand out. I have persistently argued against the squandering of Nigeria’s forex which its management connotes. The IMF report aligns with my position, stating, “a unified and market-clearing exchange rate remains critical to enhancing confidence.”

It avowed:“The mission reiterated its past recommendations to move towards a unified and market-clearing exchange rate by dismantling the various exchange rate windows at the CBN, accompanied by clarity on exchange rate policy and supportive fiscal and monetary policies. In the medium term, the CBN should step back from its role as main FX intermediator, limiting interventions to smoothing market volatility.”

The IMF also urged the apex bank to allow deposit money banks determine FX buy-sell rates, in collaboration with the apex bank, which earlier this year, at the launch of RT200 policy, revealed its plan to stop selling forex to banks, allowing them to source forex for their customers.

It reported further that an unsteady exchange rate regime is one of the numerous factors fueling devaluation, hindering much-needed capital inflows, encouraging outflows and constraining private sector investment in Nigeria.

This week, another Bretton Woods institution, the World Bank, released a report on “Nigeria Public Finance Review”, and just like the IMF, also denounced Nigeria’s forex management, with a call for an urgent creation of a unified, stable market-based exchange rate.

The World Bank reported that an end to Nigeria’s crooked forex policy could help increase public revenues, noting that for years, a large share of Nigeria’s resources was being used to finance so many inefficient and regressive things, official forex rates inclusive.

This official forex rates must end. Forex must be sold at market rate. The era of multiple forex exchange rates must likewise end in Nigeria for this country to optimally utilise its forex. These are the key points the IMF and the World Bank are making in these two reports quoted above. They have persistently been making these points for years.

No doubt, if government forex is sold at market-based exchange rate, it would naturally eliminate sharp practices in the current official forex policy. Those benefitting from the hopeless skewed forex policy don’t want this to happen. A country struggling with forex can’t be selling the limited amount it has at dubious rates. But this is what the CBN is implementing in our country with declining external reserves.

Direct inflow of USD into a system where there is one useless official exchange rate (that is also artificially low) is usually hindered. The demand management strategy currently being adopted by the CBN also needs a reconsideration. That was why Vice President Yemi Osinbajo called for measures that would increase the supply of foreign exchange in the market rather than simply managing demand, which opens up irresistible opportunities for arbitrage and corruption. The Vice President, who spoke in August last year at a Mid-term Ministerial Performance Review retreat, also made a case for a market-reflective exchange rate for the Naira.

Back then, Osinbajo professed: “We cannot get new dollars into the system, where the exchange rate is artificially low…It is a well-known fact that foreign investors and exporters have been complaining that they could not bring foreign exchange in at N410 and then have to purchase foreign exchange in the parallel market at N570 to meet their various needs on account of unavailability of foreign exchange.

“Only a more market-reflective exchange rate would ameliorate this. With an increase in the supply of dollars, the rates will drop and the value of the Naira will improve. The real issue confronting the economy on this matter is how to improve the supply of foreign exchange, but this will not happen if we do not allow mechanisms like the Importers and Exporters (I&E) Window to work.” It was a simple and forthright position.

One deceptive argument beneficiaries of the manipulated Naira exchange rate always put forward is that the currency will crash further if market forces are allowed to determine its rate in the official market. This is false. Rather, the Naira will benefit from market-driven rate at the official forex market, because inflow will improve considerably. Many will be happy to sell forex in the official market. There will be no reason for round-tripping and speculative trading will die naturally. The Naira will thus appreciate. Pressure in the parallel market will also reduce.

Sharp practices are persisting in the purchase of official forex in Nigeria because of the huge gap between official and unofficial forex rates. The CBN knows this. For years, it has been struggling to ensure sanity in the Personal Travel Allowance (PTA) and the Business Travel Allowance (BTA) doled out to Nigerians at official rate. Round-tripping has persisted in the PTA/BTA arrangement because of the massive profit opportunities.

Some people simply collect PTA and BTA to resell. At a point, the CBN instructed banks to publish the names and Bank Verification Numbers of customers who abuse its forex policy. The apex bank lamented that it had received, and noted with concern, reports of sharp practices “by some unscrupulous customers,” circumventing the new CBN policy on the sale of forex for overseas personal and business travels”. The bank said some of the unwholesome practices included the use of fake visas and cancellation of air tickets after the purchase of PTA/BTA.

The CBN expects travellers to return unused PTA/BTA within two weeks as stipulated in the customer declaration form. It is demanding that if not utilised for the intended purpose, or if for any reason, the scheduled trip is cancelled, the PTA/BTA must be returned. The CBN is evidently being unrealistic. This will never happen. PTA and BTA at official rates must end for Nigeria to progress. Besides, it amounts to subsidising all manner of foreign trips. Somebody is going on holiday and getting forex at official rate! What is the business of the government with this?

Another manner through which the federal government has been squandering Nigeria’s forex is its allocation at a concessionary rate for payment of overseas tuition fees. The government has simply been subsidising tuition fees for Nigerians studying abroad. A good government must not be seen subsidising foreign education. It must not be seen subsidising the rich to send their children abroad for education. Between June 2015 and August 2022, the CBN provided a staggering $3.5 billion at official rate to fund education abroad.

A single exchange rate, determined by the forces of demand and supply, will invariably boost inflow of forex. This is the way forward for Nigeria. Our country’s economy will be the biggest beneficiary. In fact, Naira will gain from market-reflective steps.

Paseiro Still in Charge of Super Eagles?

It is scandalous that José Peseiro is still the Manager of Nigeria’s senior national team, Super Eagles, almost two weeks after that 4-0 humiliation by Portugal. Those running the show at the Nigeria Football Federation should be trampled because they have failed to respond appropriately to the humiliation. This is not just about the defeat. It is more about a manager, who glaringly showed that he has no business managing the Super Eagles. During the friendly game with Portugal, Paseiro showed that he is technically and tactically bankrupt. He could not even read the game and make appropriate changes. Besides, he could not communicate effectively with the players, as he was struggling with his English. This showed in all the four friendly matches he supervised.

Paseiro clearly brought in largely wrong players for the friendly with Portugal. It shows he still does not understand Nigerian players several months after taking charge. No wonder he played Calvin Bassey at left full back. On current form, Ejuke Chidera should be in the team. He did not look in his direction, but invited sloppy footballers like Wilfred Ndidi, Emmanuel Dennis, Maduka Okoye, Moses Simon, Joe Aribo, Terem Moffi, Paul Onuachu and Kevin Akpoguma. With a good manager, these guys should have no business with the Super Eagles.

The 62-year-old Paseiro has failed to get a win in all his four friendly matches for Nigeria. He would probably never win any match because he is not the right man for the job. I don’t have to be a seer to know that Super Eagles will struggle during the next AFCON qualifiers and would probably miss out of the African Nations Cup if Paseiro is kept as Manager. It is so sad that the only requirement for getting a shirt in Paseiro’s Super Eagles is to be playing in Europe. This man stays in Europe and only comes around when there is match. He is not interested in players in the Nigerian league.

Clemence Westerhoff succeeded with the Super Eagles because he lived in Nigeria, watched the Nigerian league and forced Europe-based players to compete for shirts with players from the Nigerian league. Under Westerhoff, players moved from our local league into the Super Eagles. I’m talking about the likes of Finidi George, Uche Okechukwu, Elahor and Ben Iroha. That was the golden days of the Super Eagles.

Former Nigeria international, Daniel Amokachi was apt when he blamed Super Eagles’ problems on wrong coaches and the wrong players: “When you look at the game with Portugal, that tells you that we don’t even deserve to be at the World Cup. There are one, two, or three different angles from which you have to look at it, bringing in the right coach, bringing in the right players, and getting the right environment to play. We always bring the wrong coaches to handle a country like Nigeria; we always bring the wrong players.”

The way forward? The NFF must sack Paseiro now. Nigeria must go for a Dutch coach that also speaks English. This country has a history of doing very well with Dutch coaches.

The Ruins of Malam Fatori

Nigerians are tired of being told that Boko Haram and ISWAP have been decimated. They are tired of the unending false narratives that ISWAP and Boko Haram fighters are surrendering in thousands. Many are tired of these false stories persistently pushed out by the military and the Nigerian government. Facts on ground do not support these. Seven days back, ISWAP fighters stormed Malam Fatori town, in Abadam LG of Borno State, killing and maiming. Hundreds of houses were destroyed and scores of innocent Nigerians killed.

An army base in the town was also attacked with an undisclosed number of soldiers killed. The terrorists, who drove trucks fitted with machine guns, spent over 24 hours in Malam Fatori, committing atrocities unhindered. In the predawn attack on the base and the town, the jihadists hurled explosives to kill residents; some inhabitants drowned trying to flee.

A military source said, “ISWAP terrorists caused huge destruction which we are working to quantify. They attacked the military base and engaged troops in a fight while a second group went on a killing spree and arson in the town.”

Abadam LG, on the western coast of Lake Chad, remains a stronghold of ISWAP. The terrorists have their headquarters at nearby Kamuya village, which is the largest ISWAP camp in Lake Chad area, about eight kilometres from Malam Fatori. All the previous attacks on Malam Fatori were launched from Kamuya, a village ISWAP has fortified with mines and heavy weapons. The Nigerian military knows this. To destroy ISWAP, Kamuya must be taken.

For now, the traumatised people left in Abadam are still counting their losses and burying dead bodies. They are combing the bushes and picking up the dead bodies of their loved ones. The people are also picking and burying dead bodies washed to the shores.