Re: How to get rich from Buhari’s government

Q: By stubbornly refusing to devalue a naira that has already devalued itself, the government is creating a huge industry of corruption, endangering the economy, encouraging capital flight and divestments, and preventing investors from coming into the country.

 Zayyad Muhammed in his piece titled above in Business Day, Tuesday, February 9, 2016, argued that courtesy of the current administration’s war on corruption, the practice of self-enrichment from government coffers that flourished in past administrations have been firmly stamped out and that the only legal way to make money in Nigeria henceforth or during the tenure of this administration, at least, is “through legal, legitimate and clean process and not the usual corrupt and opaque way of making money from the Nigerian government.”  He averred that “to get rich from Buhari’s government, people must have smart brains, honesty and the passion to contribute to the country’s development through due process.”

Zayyad is largely correct in his assessment of the Buhari administration. True, the administration’s war on corruption is picking up and getting corrupt people and businesses very nervous. They are beginning to get the message that it will no longer be business as usual and they may actually end up in jail.

However, what Zayyad omitted or rather failed to notice was that just as the Buhari administration is busy plugging loopholes and chasing after corrupt officials, his administration is equally opening up new areas for corruption through arbitrage opportunities.  Simply defined, arbitrage is “the simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms.”

By irrationally maintaining a dual exchange rate system where the official exchange rate is N199 and the black market or unofficial rate is N306 to a dollar, the Buhari administration is not only subsidising the rich and the connected at the expense of the poor, but also creating a huge industry of corruption where smart politicians, businesses, and well-connected individuals game the system by obtaining dollars at the official rate and selling same at the black market to make huge profits at little or no cost.

The argument that the Central Bank is supplying cheap dollars at official rates to manufacturers is actually ridiculous. Most genuine manufacturers have no access to the CBN’s dollars. They get their dollars from the black market. Rather, those dollars go to fake manufacturers and business men who are adept at gaming the system, opening up fake Letters of Credits, obtaining the dollar at the official rate and selling them off at the black market. It is no wonder that the dollar has become the most profitable commodity for the connected and those lucky enough to get it at the official rate.

Even for genuine manufacturers who get it at the official rate, they usually index their prices against the black market price. That explains why the economy runs on the black market rate and not the government/official rate. So, whatever way it goes, the manufacturers and businesses gain and the people and country lose.

Meanwhile, genuine investors are being put off by the unpredictable environment where the government rigidly refuses to devalue a currency that has already devalued itself and is selling at its true value at the parallel market. They would rather wait until the situation is sorted out before they can bring in their money. By stubbornly refusing to devalue a naira that has already devalued itself, the government is creating a huge industry of corruption, endangering the economy, encouraging capital flight and divestments, and preventing investors from coming into the country.

Clearly then, while the Buhari administration is trying to fight corruption and plug loopholes that encourage corruption in the system, it is also opening up new avenues for corruption and destroying the economy in the process. For the millions of Nigerians who voted for him on the expectation that their lives will be better, it is still not yet Uhuru!

Christopher Akor

 

Akor is on the editorial board of Business Day