As I write this, I have just returned from the NESG/CBN Breakfast Dialogue with the CBN Governor. Given the nervousness about the economy during an election period and the backdrop of plummeting oil prices and the naira’s subsequent depreciation, this was a welcome event.
The governor’s presentation was based on analysis of the naira’s historical peaks and troughs set in the context of the global economy. All well and good. Clearly, Nigeria’s economy is in no position to avoid the impact of the decline in oil price and the CBN itself has to manage within the space between that global economy and our own government’s economic and fiscal policies.
Rather than asking why our currency has to depreciate, the big questions should be around why this has taken us by surprise, what we had been doing to plan for such an ever-present possibility, and what we did all that time we had surplus to plan for a ‘rainy day’. I am reminded of a housewife who wins an amount on the football pools and buys new toys for the children, a new car for her husband and a new TV for herself, but has nothing left when the landlord comes for the rent and school fees are payable. Her family would have a legitimate grievance when they cannot afford petrol for the car or diesel for the generator to watch the TV.
This is where Nigeria is today and this is no fault of Mr Emefiele, who can only manage what is within his remit and consequent on our government’s policies. The key thrust of his conclusion was that we should not panic. Specifically, panic-buying of foreign exchange or teeming and lading and other malpractices by banks would only make things worse. Only by orderly conduct and behaviour by all stakeholders in the Nigerian economy would we wait out the crisis until the oil price improved or other fiscal measures took effect. To some extent this was ingenuous. Asking banks NOT to arbitrage any opportunity would be like asking a bull to tiptoe round a china shop. I actually heard two people whisper, “But that’s business.” Any appeal to better nature in Nigeria’s best interest is bound to fail. Carrot and a very big stick would seem to me to be more appropriate.
What was probably more interesting was the subtext of the question and answer session. The governor’s cheerleaders, including Aliko Dangote and Jim Ovia, were visible and voluble on his behalf and we would expect nothing less. Other heavyweights were less congratulatory.
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Faysal El-Khalil reminded us that he (El-Khalil) had been here during the various crises from the 70s until now (which is why he commends so much respect amongst so many of us). He made the point that the one thing we should all have learnt over that period is that intervention never works. At best it can postpone pain but never contain it. Only long-term sustained policies, which address the key imbalances in the economy, can do that – the implication being that during the times of surplus we had had that opportunity and eschewed it.
Pascal Dozie made the remark that at this meeting the governor was preaching to the converted and that it was to the relevant ministers he should be directing his attention. He could also have added that the many hundreds of thousands of small businesses not represented would also like to understand why they have been suffering from non-availability of funding and penal interest rates if they get it – even before the crisis. Now interest rates have gone higher, they can hardly afford foreign exchange even if they can find it, and yet they are still paying well over the international price for the diesel that drives their generators.
Amongst other questions were some from manufacturers. Manufacturing, as I have written severally, is suffering. The CBN has stopped all manufacturing sectors from obtaining currency at the RDAS and many even struggle to fund their inputs at Interbank. What I fail to understand is that if the CBN treats food manufacturers and heavier industries, such as our newly-vaunted automobile producers, with such disdain, who is it exactly that has such a higher importance for the economy that they are obtaining subsidised foreign currency through the auctions? Given the governor’s belief that all stakeholders should commit to orderly mutually-benefitting behaviour, surely the RDAS should be suspended for everyone. I have seen no definition of who is entitled to this subsidised rate and I suspect I am unlikely to. So if we are truly to heed the governor’s message that we should neither panic nor exacerbate the crisis through precipitate self-interest, then we should all be on a level playing field and no one sector of the economy or vested self-interest be allowed preferential access to foreign exchange.
Keith Richards
