Devaluation: Did Buhari get it wrong 31 years ago?

Last week my security gate keeper suddenly packed his luggage with the intention of quitting his job.

The reason he decided to withdraw his services and return to his country is the weakening exchange rate between the CFA franc-currency of the Francophone countries and the Naira.

If you have not guessed already, my security man,Honoree is from the republic of Benin and after receiving his salary every month,he changes a portion of it into CFA franc and remits same to his folks back home.

Owing to the fact that the Naira was stronger than the CFA franc,he migrated to Nigeria to work and earn income to be remitted home, but with the current devaluation of the Naira- less CFA franc is now being exchanged for the Naira so working in Nigeria which was attractive in the past, has now become unviable for Honoree, necessitating his decision to return to his home country.
My gate keeper’s sudden decision has put me on notice with my chef, Micheal who is from Togo.

Only a couple of weeks ago, Micheal requested for salary advance which l obliged him. On hindsight, he might have done so because the portion of his salary that he usually retains in Nigeria after remitting the other portion to Togo was probably inadequate to cover his local expenses due to the inflation arising from Naira devaluation.

My gateman and chef are just examples of millions of Africans who owing to the fact that the Naira was over valued,have been coming in droves to earn their living in Nigeria.
Before the infamous Ghana Must Go Episode of 1985-expulsion of over 700, 000 aliens from Nigerians- up till now, the high value of the Naira, has been encouraging the steady influx of artisans from neighboring countries like Republic of Togo, Niger Republic, Chad, Ghana, eking out their living in Nigeria.
These foreigners fill up job vacancies as masons , tailors,mechanics, electricians, plumbers and marble tillers etc in Nigeria simply because of the oil boom-that is now fast turning into a burst-which made our currency stronger than that of their home countries.
But with the Naira now significantly devalued, as international oil prices plummet in the past couple of months , as they say in street lingo,levels have changed,and the foreign nationals who had been working in Nigeria and have been denying Nigerians of artisan jobs, are now vacating the jobs and in the process creating vacancies for Nigerians.

Unbeknown to me, and l believe most Nigerians, my two domestic staff who are foreigners from neighboring African countries constitute a drain on Nigeria’s forex because when we pay them salaries and as foreign nationals, they convert a portion of their salaries into remittances back home and that represents an import cost which has a negative bearing on our forex resources.

Now, this is contrary to the notion created by some anti devaluation crusaders on the side of president Buhari who have argued that Nigeria does not export finished products like iPhones or high technology items like computer chips from Silicon Valley in the USA, neither is Nigeria like South Korea that has Samsung tvs or Kia cars to export which could have justified devaluing the Naira.

Conversely, devaluation advocates had fired back by validating their position with the fact that a strong Naira encourages higher propensity to import ‘cheap’ stuff like high end champagne or low end tooth pick into Nigeria including employment of foreigners to engage in jobs that Nigerians could have easily executed as illustrated by my personal experience.They conclude that it is such indulgence that has been leading to the unwarranted depletion of our foreign exchange reserve.

This is a classical case of the argument on whether the glass is half full or half empty.
One could have been compelled to net off the gains and losses of Naira devaluation, if it were to be that simple and possible at this point in time, but since it would take a while for gains and losses to manifest and be recorded , it may be too early to make that judgement call at this juncture.

For now, all Nigerians can do, is hope on the flashes of promises so far elicited by the flexible exchange rate policy along side fiscal policies like the proposed massive funding of infrastructure and others like tax and financial services reforms.

As a member of the Economic Community of West African States,ECOWAS where an economic treaty for free movement of people and goods has been signed, foreign nationals have easy migration acess to Nigeria and as the country with the largest economy in Africa,boasting of an estimated GDP in excess of $530 billion, nationals of less endowed countries have been making a beeline into Nigeria.

Considering that the recent referendum in the United Kingdom, U.K , tagged BREXIT that led to her exit from European Union, EU was influenced by jobs losses by British citizens to foreign nationals, ( white hotel guests preferred white chamber maids from Eastern Europe to non-white Britons) Nigerian authorities should have been studying the pattern of immigration into our country with a view to determining the implications on the economy in terms of employment and security/safety of Nigerians.

This is more so because it is free movement of people within the ECOWAS borders similar to what obtains in the EU which the UK just exited via a referendum ,that has been aiding terrorists in their recent bombing expeditions in France and Belgium.In a similar fashion, it is believed that the Boko haram religious fundamentalists might have been migrating into Nigeria from neighboring countries like Chad and Niger republic.

The assertion above, is buttressed by the fact that both countries that are our neighbors have been experiencing schisms related to religious fundamentalism for a very long period of time and of which Nigeria has been intervening over the years.

Naturally,humans migrate to where is safer and as the saying goes, the grass is greener.
Famine induced by drought in those countries are also believed to be very strong motivators for migration of our neighbors to Nigeria.
This is probably the reason Nigerian authorities had cause, about 31 years ago to shut down Nigerian borders to stem violent crimes and smuggling during the estimated 20 months reign of General Muhamadu Buhari on the saddle of leadership in Nigeria (1983-85) as head of state and commander-in-chief of Nigerian armed forces.

Writing in New York Times, NYT of May 12, 1985, Sheila Rule reported in a news item titled GHANAIANS EXPELLED BY NIGERIA,RETURN TO START OVER that “On May 3, the Nigerian Govt told 700,000 illegal aliens that they had a week to leave and that the borders previously closed to prevent smuggling, would be open for their departure. “In addition to the 300,000 migrant workers from Ghana, there are about 100,000 from Niger; most of the rest were from Chad and Cameroun”, she reported.

Continuing, the NYT reporter noted that “lt was Nigeria’s second mass expulsion of aliens, who had been attracted to African oil giant in hopes of gaining a foothold or fleeing drought.
Sheila Rule finally observed that “falling oil prices have slowed Nigeria’s economy , and foreigners viewed as depriving citizens of jobs are being expelled”.

When l came upon the foregoing excerpts in the course of my research for this article,l felt a sense of dejavu as l wondered how Nigeria has turned back 360 degrees to where she was 31 one years ago with the economy in doldrums, politics in shambles and the same personality-General Muhamadu Buhari, GMB back at the helm of affairs.

At first, the reality broke my heart, but thankfully instead of my heart sinking, it became buoyed by the fact that Nigeria is now practicing multi party democracy and GMB has now transformed from a dictator to a democrat having been elected president of Nigeria.

As a result president Muhamadu Buhari, PMB is now addressing the perennial socioeconomic and political challenges with less draconian policies of deporting aliens , but with more pragmatic economic and strategic initiatives like devaluing the Naira which is a monetary approach and other fiscal policy measures like backward integration and investment in infrastructure etc.

However, to finally asphyxiate Boko haram, perhaps , president Buhari should revisit the strategy of shutting down our borders-as he is now doing with War Against Indiscipline, WAI, which he is rebranding to promote discipline in our society- a hallmark of his days as military head of state.

This would enable each of the member countries of the task force against terrorism trap and confine the Boko haram insurgents and other criminal elements within their respective borders and enable them deal squarely with them before reopening the borders again with more effective policing.
Reorganizing Nigeria’s border posts would benefit Nigeria in two folds: (1) protect our borders from religious insurgents like Boko haram and cross border criminal elements (2) enable our customs service working with consultants trap revenue leaking out through smuggling.

To be clear, l’m not in any way advocating walling-off our neighbors like Donald Trump, the Republican Party presidential hopeful in the USA intends to do with Mexico.
But l’m only suggesting that we become better organized at the border posts in order to keep track of the developments in that sphere and mitigate any further negative implications while earning the tax revenue through legitimate trade currently lost to criminal elements.

Nigerian can truly be what the United States of America, USA is to North America if we position our selves very well for trade and politics that would facilitate mutually beneficial African hegemony.
Also, it needs pointing out that I’m not encouraging wholesome return of WAI with horse whipping of citizens and other barbaric acts associated with the initiative, but just a variant of it with particular attention to forming anti corruption marshals in ministries, departments and agencies, MDGs and cleaning up our environment.
Has any body wondered why there is so much filthiness in our living environs, even in highbrow and very expensive real estate locations like ikoyi in lagos and Maitama in Abuja.

In Singapore, people go to jail for littering the street with items as innocuous as bubble gum, hence it is one of the cleanest countries in the world.

By and large ,one good thing about the floating Naira policy is that as foreign nationals are now voluntarily exiting Nigeria owing to a weakened Naira, the vacancies that they are leaving behind would be filled by unemployed Nigerians hitherto denied the job opportunities by their probably more savvy foreign counterparts.

Another good thing is that a weakened Naira also compels Nigerians to descend from their high horses by toning down their epicurean tastes and settling for Nigerian made products.
Already, in place of imported tomatoes purée from China etc , fresh tomatoes widely grown in the Bauchi/Gombe zones known to be food basket are being processed into purée locally. Rice is also being aggressively farmed and milled in kebbi state with the potentials of boosting local supply and reducing import.
Similarly, Irish potatoes endemic to the Jos,Plateau state area is now about to be processed locally into packaged chips for French fries as opposed to being imported, if the devaluation of the Naira is sustained. By the same token,an entrepreneur may come up with plans on how to harness the abundant cassava crops sprouting widely all over delta state,so that it would be processed into starch to serve the pharmaceutical industry etc.
Would the backward integration and quest for made in Nigeria trend continue? Provided the policy of devaluation is sustained, it could.
And that would be awesome because,all the ventures mentioned above would add to Nigeria’s GDP and create employment opportunities for our teaming youth and this might not have happened,if the Naira were not devalued.

But the narrative above are just the palatable and sunny part of the Naira devaluation experiences which have become a swan song of sorts.

There is the gloomy ,unsavory and dark side to floating of the Naira which are just beginning to manifest.

With dollar exchanging at N400/$1 in the open market as opposed to N197/$1 barely a couple of months ago, the prices of practically everything in Nigeria are now double, in consonance with the doubling of the Naira exchange rate .

As a result, banks balance sheets are now double the original size, and to keep their lending within financial institutions prudential guidelines,they have to make provisions to forestall violating the limits without granting new loans.

Consequently, practically all the banks in Nigeria are not granting new credit facilities as they are struggling to balance their accounts in light of their over exposed loans positions which are precarious.

As it is universally acknowledged, the banking system is the heart of every successful economy, so imagine, if the heart is ailing.The least consequence is that the whole body gets sick.

Arising from the above premise, without equivocation,the health of Nigerian economy has once again degenerated and as such,the financial system may be rolled into Intensive Care Unit , ICU.

Undoubtedly , Nigerian financial system is basically gasping for breath, apologies to former president Olusegun Obasanjo, who recently used the metaphor to describe the former ruling political party People’s Democratic Party, Pdp, a platform with which he ruled Nigeria for 8 years.

Depending on how dexterous the authorities are, the economy may be resilient enough until boom returns again or become unable to withstand the Naira devaluation pressure and literarily fall off the cliff.

Already the CBN has granted banks leave to write-off the bad loans in their books before the end of the financial year which in essence means the standing rule that such loans must be carried in their books for at least one year is being waved. As further proactive and remedial actions, banks are also gearing up to go to the capital markets to raise funds to strengthen their capital adequacy positions.Those are encouraging policy initiatives that could prevent an even worse fall out of Naira devaluation that could force the economy into tanking or going belly up.
With a combination of the aforementioned concessionary measures to banks by the CBN and sheer grit of Nigeria’s economic management team added to the dexterity of bank managers and owners , the economy could survive these initial harsh operating environment and stabilize with a broader industrial base and via diversification.That also implies that Nigeria would also become self sufficient in production of food items like rice and other supplies which she currently imports as well have a more robust basket of products for export as sources of forex income as opposed to the current state of being solely dependent on crude oil.

As l contemplated the current developments, four, 4 positive thoughts about devaluation popped up in my mind in quick succession.

(1) Who would have thought that a very strong Naira exchange rate was partially responsible for the high unemployment rate now estimated by the national bureau of statistics, NBS to be at 12.1 in Nigeria, the highest level in 10 years?

(2) It’s the strong Naira that is responsible for the penchant for Nigerians to have special champagnes named after them(remember Akinloye champagne in the 2nd republic ); posses fleets of exotic cars and have up to three private jets in their hangers as well as own luxury chateaus abroad where they host lavish birthday parties for themselves, plus host offshore wedding extravaganzas for their children.

(3) With a weak Naira,the massive out flow of forex via medical tourism to India and Israel would be reversed as Nigerian entrepreneurs would have to make efforts to partner with medical firms in those countries where the infirm in Nigeria have been trooping to seek Medicare.It would be easy to convince potential partners to set up hospitals in Nigeria, as its been proven that the market exists.

(4) Had the authorities figured out long ago that it is a strong Naira was responsible for the massive presence of aliens, especially Ghanaians in Nigeria which prompted their expulsion on May, 3,1985-some 31 years ago- the Naira could have been simply devalued to trigger the return of Ghanaians back to their home country, as opposed to the harsh and rash expulsion policy infamously branded ‘Ghana-must-go’?

That unfriendly policy introduced to deport the aliens consequently generated the bad blood that tore the fabric of the African bond between closely knit societies earlier forged by Nigeria’s foreign policy which is Africa centric as it made Africa as the centre piece of her foreign policy.

This policy spurred Nigeria into fighting to liberate countries in the southern African region, by helping in transforming Rhodesia to Zimbabwe under the leadership of Robert Mugabe and ending apartheid in Southern Africa that culminated in the election of Nelson Mandela as president as well as ending the internecine wars in Sierra Leone and Liberia.

On a recent visit to Nigeria, the president of Benin republic , Patrice Talon remarked to state house correspondents, after meeting with president Buhari, that the economic melt down in Nigeria is negatively impacting the economy of his country.That’s not surprising because most of the petroleum products imported into Nigeria used to be smuggled out of Nigeria into neighboring countries and sold at half the price due to the subsidy provided by Govt for the commodity.

Tellingly, Paul Biya,the president of Cameroon, another Nigerian neighbor which is also a destination for Nigeria’s subsidized petroleum products was also recently on a visit to Nigeria after Ibe Kachikwu led petroleum ministry and NNPC persuaded president Buhari to abolish the obnoxious fuel subsidy that gulped trillions of Naira that should have been invested in infrastructure,since the past decade of its introduction.

Similar negative economic impact is being felt by business men and women in our neighboring countries who had been enjoying the benefits of commodities such as rice,fish, chicken and other essential items hitherto being smuggled into or exported out of Niger illegally.

What all the above scenarios portends is that slowly but surely, the positive effect of Naira devaluation or realistic pricing of the Naira is setting in gradually.The current positive outlook, speaks to the fact that Nigerian authorities are now investing more critical thinking into policy initiatives than she did previously when actions were based on mere impulses of individuals.However, we are walking a very thin line as the nation faces the grave risk of descending into the sordid level of failed economy where hunger and starvation are the order of day which is currently the situation in Venezuela,if the managers of the economy are not vigilant enough to make critical decisions at the right time

On the fiscal policy side,the authorities must apply more zest going forward. Nigeria must pursue the establishment of more petroleum products refineries and l’m convinced that president Buhari, having been instrumental to the establishment of the refineries in Port Harcourt, Warri and kaduna,in his hey days as petroleum minister, is determined to accomplish the objective in his reincarnation as a democratic Nigerian leader.
The only exception is that this time, the refineries have to be set up by private sector participants, with Govt only serving as an enabler, since it has been demonstrated clearly that there is market for it locally and regionally, as reflected by the quest for the products from surrounding countries whose leaders have been visiting since cessation of fuel subsidy regime-the disincentive for smuggling.

With the fuel subsidy removed,and the Naira devalued,according to Vice President Yemi Osinbajo,the volume of consumption of petroleum products has dramatically dropped from about 1,600 trucks to 850 a day which is about half the previous number, signifying that the rest used to be smuggled out.
In the spirit of African brotherhood and in support of ECOWAS initiative as well as Pan Africanism, Nigeria should explore the extension of NNPC Retail outlets to surrounding African countries with a view to easing supply of petroleum products and discouraging smuggling when our refineries come back into production.Its not really a novelty as Citgo in the USA was originally set up by Venezuela, one of largest crude oil producers to serve her neighbors in the Americas.

MRS and OANDO retail fuel companies also operate a smattering of stations across our neighboring countries.I have read a ridiculous proposition that since refineries in Nigeria are currently not in production owing to their decrepit condition, as a stop gap measure, Nigeria should resort to importing finished petroleum products from land locked Niger republic where the Chinese recently helped in setting up a modular refinery. If a modular refinery in Niger republic is viable, the Nigerian entrepreneurs can set up modular refineries in Sokoto, Yola and maiduguri to serve Nigerians and people in neighbouring countries.

Nigerian banks already dominate the continent by spreading their branches, Africa wide. United Bank For Africa,UBA for instance boasts of being located in 14 African countries.So also does Zenith bank, Gtbank and Access bank amongst others.
Similarly, Dangote group have cement factories in over a dozen African countries.
Arik airline has since become pan African by operating flights into key African countries from Nigeria.

Talks about common passports for estimated one billion Africans is being discussed by the African Union, AU comprising of at least 54 countries.Obviously, Africans are mimicking Europeans and their European Union, EU concept.

Given the experience of the EU in terms of the growing rate of terrorism facilitated by the ease of movement of Europeans across borders and the labor migration issues that galvanized the working class in Britain reflected by the votes in favor of Britain exiting the EU,dubbed Brexit,Geofrey Onyeama, minister of foreign affair’s proposal at a town hall meeting that Nigeria would subscribe to the African common passport project in 2017, should be subjected to greater scrutiny.
In Africa, Nigeria is the equivalent of Germany in terms of market size based on GDP.
Our nation must benchmark with the German experience in EU viz-a-biz the sentiments of Britons,before we make that judgement call.
Hopefully, the businesses that also migrated out of Nigeria to countries like Ghana-tyre firms like Michelin, Dunlop- due to among other factors,lack of infrastructure and inconsistency in policies, would also return as Nigeria steps up to the plate by dedicating 30% of her annual budget to capital expenditure which would boost infrastructure development that would bridge the deficit, if the budget provisions are properly implemented.

These developments validate our earlier argument against apostles of devaluation of the Naira as the only panacea to Nigeria’s financial ailment.Some of us had contended that the policy was not a magic bullet but that it is indeed a combination of both monetary and fiscal policies that would pull Nigeria back from the brinks of economic collapse.
Unsurprisingly, the Foreign Direct Investments, FDI which proponents of devaluation vowed would come in torrents by assuming that both Nigerians and foreigners holding their funds in forex would cash-in on a weakened Naira to reap the margins, have remained a mirage largely because other fundamentals like poor infrastructure and policy inconsistencies as evidenced by recent CBN approval of preferential exchange rate for pilgrims,have remained unaddressed.l don’t buy the puerile argument that the rate pilgrims are paying for he Naira is the pre agreed one in April when approval was granted. How about the importer who ordered his goods in April based on old forex rate? Is he paying the import duties for the goods based on the prevailing rate at that time or the new rates? Of course the new rate.
What was the forex rate when the budget was passed? -N197/$1. What’s the rate at which Govt is implementing the budget now, the old or current rate?l believe it’s the new rate.
If any body felt sanctimonious about religion, there could have been better and more creative ways of bridging the difference between the old and new rate for the pilgrims than applying selective rules which beggars the issue of policy consistency.

It could have been better if Aliko Dangote, the richest man in Africa and an acclaimed philanthropist, were requested to bridge the gap between the old and new forex rates for Muslim pilgrims. With the billions his companies pay in taxes, he can get a tax write off commensurate to the sum and also enjoy the opportunity of being of service to Muslims in furtherance of his Islamic faith.

Be that as it may, hopefully , in the wake of the CBN policy of raising Monetary Policy Rates, MPR from 12-14 percent, at its last meeting,a couple of weeks ago , foreign portfolio equity firms that withdrew their investments following the pegging of the Naira would be on their way back to Nigerian bourse as Nigerian bonds now attract as much as 16.5%.
In fact, Goldman Sachs emerging markets index which dropped Nigeria in the thick of the currency crisis, may re-list her with the new developments which make Nigerian bonds mouth watering considering that in countries like Japan and German, bonds are priced at zero or negatively priced.

With a fiscal policy of fuel subsidy removal working in harmony with the monetary policies of devaluation of the Naira and generous bonds/equity pricing, there seems to be light at the end of the tunnel, provided Aso Rock remains consistent and relevant authorities continue to reassure investors from Nigeria and foreigners alike that the current Govt in power and her economic team have the strategy and capacity to turn Nigeria’s economic fortunes around.

Now, ‘hot’ money from foreign portfolio investors , so called because of the speed at which they leave in the event of suspected instability, may be the first to make a come back into the financial system because of the speed with which they come and go, and they would provide the needed dollar float that CBN requires to boost supply in order to meet the unbridled demand in the new regime of flexible exchange rate.

Subsequently, the flow FDI into the real sector may follow suit, especially in the manufacturing and infrastructure segment, if the forex regime is straightened and becomes stable.

Equally, critical is release of funds into the cash strapped financial system via payment of outstanding debt to local contractors by both federal and state govts,estimated to be about 11 trillion Naira.

This would trigger a return to lending, a critical activity which most banks have currently suspended due to the financial anaemia engendered by the withdrawal of Govt funds lodged in money deposit banks, DMBs in furtherance of the laudable but poorly implemented Treasury Single Account,TSA policy.

Ominously, that could also be a double edged sword as buoyant banks may also resort to purchasing treasury bills/bonds at 16.5% which is more convenient and less tedious than extending loans to sometimes entrepreneurs who are very likely to default in payment.

Such are the economic dilemmas that deft management by astute economic management team would be contending with, hence it is critical that the private sector is not entirely left out as mr president had alluded, in a recent media interview.

Unlike what happened at the inception of this administration , when the authorities initially demonized Nigerians by constantly labeling them as fantastically corrupt and thus inadvertently de-marketing the country,the establishment can not be punching below Nigeria’s capacity by not articulating intelligently, the framework of policies being implemented and the anticipated outcome to make Nigeria great again.

If president Buhari got it it wrong 31 years ago by resisting the devaluation of Nigerian currency when he ruled Nigeria as an army general, he now has the opportunity to correct the wrong as a democratically elected president,today by being more dynamic in leadership and business savvy.

Fortuitously, mr president made the right decision a little less than two months ago to conquer his fears and put behind him the ghost of 1984-5 by allowing the CBN float the Naira on 20th June, 2016.

At first, it might seem like he made an unwise decision in succumbing to the pressure mounted by devaluation exponents, especially as the Naira /dollar rates have are yet to reach an equilibrium. But l take solace in the hope that the legendary ‘can do’ spirit that Nigerian dream team 4 exhibited in the ongoing Rio Olympics when under severe financial and physical constraints, the team defeated their first,second and fourth opponents in football matches, to reach the semi final stages of the ongoing Olympics would prevail in Aso Rock.
I anchor the optimism on the expectation that the Nigerian attitude of never-say-never, would become increasingly aroused in mr president and his economic team, as they struggle to pull the nation out from the ravages of the current global economic meltdown.

As the great voyager and discoverer, Christopher Columbus once posited, “You can never cross the ocean until you have the courage to lose sight of the shore”
This implies that you cannot make a great breakthrough until you let go of the past.
Mr president must let go of the ghosts of the past,and look ahead into the future, so that the change he promised Nigerians,can manifest faster.

Onyibe, a development strategist, futurologist and a former information commissoner in Delta state, is an alumnus of the Fletcher school of Law and Diplomacy, Medford, Massachusetts, USA.

Views expressed by contributors are strictly personal and not of TheCable.