Nigeria has serious problems with corruption and bribery, stealing from government, kidnapping, embezzlement and privateering of collective resources, money laundering, drug trafficking and trading, prostitution and other such underground crimes, and what have you. This means that we must constantly clean our system. I am however not sure anything has been done in this regard since the return to democracy in 1999.
I was going to really join issues with one of Nigeria’s top economists and member of the president’s economic advisory committee – Mr Bismarck Rewane. But I will now tone things down a little because he’s been out calling on those who have taken his presentations out of context to correct themselves. But I doubt if he was really taken out of context. Mr Rewane does this monthly presentation at Nigeria’s ultra-right foremost business school, where they have always pushed out neo-liberal economic ideas and influenced policy in Nigeria. Lately he was on Arise TV pushing his views. And, indeed the numbers that have been quoted – the so-called 200% over-valuation of the Nigerian naira, and the need to devalue next month – were taken verbatim from his recent presentations.
So, my challenge to the gentleman is how did he come up with the idea of a 200% overvaluation of the naira? I have been singularly fighting these wild guesses from guys who like to repeat them because it curiously gives them a sense of intelligence. Mr Rewane is an authority in his own right, and he has track record behind him. But if he makes such claims without logically backing these up empirically, he may singularly plunge Nigeria into a roiling economic crisis. It sounds elegant to quote all these figures and conjure up tangential theories to back them up. But guys like Rewane have a coterie of disciples who believe everything he utters and act on them. In fact, the government of Nigeria laps up whatever he says. I have seen elsewhere when – while Kemi Adeosun was Minister of Finance – the economy went into a downturn, the lethargic President Buhari had called for advice from the nation’s top economists and Mr Rewane advocated the establishment of a second Asset Management Corporation of Nigeria (AMCON) to take over new bad loans from banks and help them restructure, while their balance sheets are once again lightened using taxpayers’ money. I was aghast!
If Mr Rewane says the naira is overvalued by 200% and it is officially N430 to $1 today, this means the naira should tumble over twice to N430 x 3, which is N1,290 to the US dollar. Now, we know the naira could never be a match for the dollar. But as I’ve tried to explain several times, the solution does not lie in summary and harebrained devaluations of the currency just because we are trying to fulfil the precepts of some textbooks written under and for different contexts, environments, and evidences. Such actions will be totally academic, and destructive. It is how we got here since 1986. Our industries are still basic and comatose. Devaluation did not help us. It has made our lives more difficult, made millions more of our people jobless, shut down our industries – even as we opened up for foreign investors, and taken us into a spiral of hopelessness and underproductivity, whereby we are expecting even more devaluation and actually now calling for it.
What Mr Rewane has done by that statement or presentation, is to force the hands of the Nigerian monetary authorities to devalue the currency. He has enabled speculators and arbitrageurs to consolidate their positions against the naira. Remember that even in Hollywood, they have acted a movie about the prospects of the naira. In that series (Billions, Episode 5), a fictional Central Bank of Nigeria governor told his American friend that he intended to devalue the naira. As financial markets people, the American and his friend got together, borrowed huge amounts of money from Nigerian banks, bought dollars in the open markets and everywhere they could find, and by the time the naira was devalued, they made a princely $5 billion. This profit had nothing to do with Nigeria’s productivity or international trade. No goods exchanged hands. And this is what most Nigerians who have the wherewithal did a couple of weeks ago when the naira dropped to an all-time-low of N716 to the US dollar. The market had cooled down a bit (to about N630 in some places), when Mr Rewane dropped this new bombshell, that naira was/is 200% overvalued. I repeat that the metrics and rationale used to arrive at that number is totally random, academic, and unfounded, just as the Agusto and Co position that we should devalue the naira yearly by the difference between the inflation rates in the two countries (crawling peg). Note too that whereas we seem tethered to the US dollar, the USA as a country is not among our five top trade partners. Why the fixation on the dollar?
I have disagreed with everyone who throws this idea that the naira is overvalued – include Vice President Osinbajo. Indeed, we know that productivity and complexity-wise, the American economy is a world ahead of the Nigerian economy. We seem to be the only country in the world where the entire citizenry is obsessed with this difference with a view to dumping their local currency. Dozens of other countries are aware but are more obsessed with catching up, in terms of sophistication and the complexity of what they produce, than in running away from their currency. The UK, for one, is losing grounds against the dollar. In truth, the UK’s economy is smaller, less complex, less sophisticated and less productive in general, compared with that of the US. I was in Felixstowe Ports in Ipswich, UK in 2009 or so, and it was miles upon miles of empty containers they were battling to ship out of the UK. The UK admittedly imports much more than it exports. They are trying to force themselves to be stronger, which is why they did Brexit. Ordinarily, given the theories in the books, the British pound is supposed to be much weaker than the US dollar, at maybe 20 to one. But the UK will never dare it. Today it is still strong ($1.3 to £1). This position of mine is open to challenge from Messrs Rewane, Osinbajo and anyone else who believes in their position. And also, I have always educated whoever cares to listen that we should avoid self-fulfilling prophecies which precipitate currency crises. It is even worse, indeed egregious and unacceptable, when top leaders of a country, including members of economic advisory councils, are the ones unleashing this debilitating damage on their nation’s currency, thereby creating unnecessary inflation that impoverishes millions of people. In serious countries, they should be resigning their positions. But then, this is Nigeria. We don’t care. They even have thousands of self-maximising vuvuzelas.
The Governors’ 33 Suggestions To Buhari
Talk of being selfish – because all these guys who ask for the naira to be devalued are such who hold heavy positions in the US dollars, home and abroad. Osinbajo’s son was seen spending dollars at Yusuf Buhari’s wedding and another one was lecturing us about how much dollar he could make from trading cryptocurrencies (which have now generally crashed 80%, with some liquidating totally). When such people make such statements, it is akin to inside trading – a financial crime. Because if indeed the naira is devalued, they cash out ‘bigly’.
None of the suggestions considered what the elites could contribute. No mansion taxes. No property taxes. No luxury taxes. No increases in the taxes of those who already earn a lot. The governors and their friends are to contribute nothing. Nothing on capital gains taxes. So, do not be surprised that the average Nigerian is great at telling others what to do, never what he too could contribute to saving a dying nation. Everyone is interested in maintaining their own class advantage.
The governors allegedly put out 33 advices or suggestions to President Buhari since July. These suggestions came out during the week. Some of them make sense, but most are rubbish. Coming at such a time, it is obvious that the governors – if they indeed brought out these suggestions – were taking the piss, as the Brits would say. They suddenly woke up from their slumber, having maxed out on their power, their enjoyment and consolidated their financial positions to tell the president to pay off any civil servant over 50 years old. Most of the governors are over 50 years, so they too should resign forthwith, right? Are they not also purportedly working for the country? They told the president to immediately remove the fuel subsidy – and thereby create maybe a 300% inflation, which will have people on the streets rioting. Whoever suggested that is a maniac. They also said the government should suspend the planned increases in the salaries of civil servants – increases that were planned to help these workers cope with inflation, which could really already be as high as 40%. I laughed out loud when they suggested that the N19 trillion Central Bank of Nigeria (CBN) exposure through Ways and means to the Federal Government should be converted to a 100-year bond at the rate of 1%. Who will buy that crap at such a rate? Delusional, indeed. Whoever it is that wrote the suggestions – because I don’t think it could have come from the governors – also suggested an immediate increase of the value added tax (VAT) to 10%, with a view to targeting 20% shortly. The person is indeed maniacal, as he suggests that everybody – even poor people earning nothing or N30,000 – should be taxed, going forward. They suggested minimum tax of N100 would be deducted from the phone balances of people by government no matter what they earn – even those who depend on donations from friends and family. Imagine that!
None of the suggestions considered what the elites could contribute. No mansion taxes. No property taxes. No luxury taxes. No increases in the taxes of those who already earn a lot. The governors and their friends are to contribute nothing. Nothing on capital gains taxes. So, do not be surprised that the average Nigerian is great at telling others what to do, never what he too could contribute to saving a dying nation. Everyone is interested in maintaining their own class advantage. God help us.
Going After Black Money – A National Imperative
From my own angle, whereas we should get stricter with taxes – and incorporate the ones I mentioned above among others – we should also, as a matter of national urgency, go after black money. This should be a national imperative and it is already so late in coming. Nigeria has serious problems with corruption and bribery, stealing from government, kidnapping, embezzlement and privateering of collective resources, money laundering, drug trafficking and trading, prostitution and other such underground crimes, and what have you. This means that we must constantly clean our system. I am however not sure anything has been done in this regard since the return to democracy in 1999.
Meanwhile, many countries without half our problems are moving right ahead in cleaning out black money and ensuring the following advantages for themselves:
Ensuring most of their money supply reside in the banking system, so that banks can be liquid and lend to the real sector;
Reducing the influence of the crime economy and making it less attractive for citizens and foreigners to get involved in crimes because they cannot power illicit funds through the system;
Reducing cash in people’s homes and therefore vulnerability to crimes;
Making it harder for currency forgers through innovation;
Knocking out corruption in a big way by reducing cash slushing around the country.
This initiative is very critical to Nigeria, more than all these unnecessary speculations that are putting everyone in trouble. We need to get our minds collectively away from speculating about the naira and putting ourselves in trouble. Any leader who cannot commit to this cannot start the war against corruption. The idea is to first de-democratise corruption and make it more difficult for anyone to get involved.
India did this in 2016 and 2017. They targeted high-denomination money, which the government believed were being stashed in different places, as proceeds of corruption, crime and criminality. The government of India was able to clean out R15.4 Lakh Crore (the equivalent of $26 billion). Another such amount may have been permanently lost by those who could not exchange their money within the set time.
As we speak, the UK has set a deadline for those holding the old £20 and £50 bank notes (their highest notes), to change these by September 30 or lose the money forever. The Americans also change the $100 note from time to time. Many Nigerians who hoard the old dollar bills lose out bigly when this is done. Also right now, the UAE has changed some of her currency notes into polymer and phased out old ones. Polymer looks to be the new preference. It is usually not very convenient to carry around in large sums. And it is much tougher to counterfeit. The world is de-materialising cash, and in many places it is now odd to carry cash or even a card. With your phone, or even a chip in your body, you can do banking transactions.
This initiative is very critical to Nigeria, more than all these unnecessary speculations that are putting everyone in trouble. We need to get our minds collectively away from speculating about the naira and putting ourselves in trouble. Any leader who cannot commit to this cannot start the war against corruption. The idea is to first de-democratise corruption and make it more difficult for anyone to get involved. Today, Nigerians are involved in corruption and sundry criminality because they have seen that our government is a joke. This effort will then be complimented with a major reorientation programme and constant repetition of what we intend to achieve with our nation. It will be great if Buhari can try this, and therefore firm up the value of the naira a bit before he leaves. If he doesn’t, the next government should seize the initiative. People will fight back. But this is a war for and on behalf of the oppressed millions.
People stashing naira at home (in septic tanks and so on), should be made to bring the money back into the banking sector or lose this. Those who are sitting on dollars must be made to sell to government at a handsome premium, while government incentivises the ‘Mallams’ who stand on roads to find another profession. By a systematic approach to clean up the system, and ensure only officially recognised BDCs are in that space, the gap between the two markets should close and Nigerians should even stop talking about the ‘black market’. The CBN should also be able to haul in so much dollars and therefore get more efficient in meeting legitimate transactions. Serious sanctions should equally be meted out on black market dollar trading, such as to make it no longer tenable for anyone to get involved. All BDC transactions should then be backed with documentation, as is done everywhere in the world.
Nigeria must rise.
‘Tope Fasua, an economist, author, blogger, entrepreneur, and recent presidential candidate of the Abundant Nigeria Renewal Party (ANRP), can be reached through [email protected]