In the past week there has been several responses to our Minister of Agriculture, Audu Ogbe’s attempt to place the woes of our currency the “Naira” on the introduction of the Structural Adjustment Program “SAP” by the Babaginda administration some 32 years ago. According to him, the Naira has been devalued every week since then for 32 years. Let us be simplistic for a minute. If we have had an average inflation rate of about 11% in the last 32 years, then the value of the Naira today, at about N357 to one Dollar is roughly correct, if Naira and Dollar was at parity 32 years ago. ( 11 x 32 year= 352 ). This is a ballpark calculation.
The fallacy of those claims about SAP is that it was just a proposal. It was never implemented. The populist view at the time will not let the program be implemented. Though it was the right thing to do at the time, we did not have the leaders to do what was right.
The story of the Naira started a little earlier in 1982, during the Shehu Shagari Administration in which Audu Ogbe was the Communications Minister. – Yes, the same Audu Ogbe.
That was the administration where we had a contraption called the National Supply Company that imported what was then essential commodities, principally rice, on behave of Government. It will be recalled that the Shagari administration that took over from the military Government of Obasanjo in 1979, had actively promoted the “green revolution “that asked Nigerians to go back to the farm.
The new Government did not see the reason to continue with that program but instead thought it wise to exhaust our foreign reserves on importing rice. Just imagine the efficiency of having a government agency importing commodities for the whole of Nigeria.
The resulting corruption, brought the government on its knees and paved the way for the Buhari coup of 1983. The supervising Czar was the then Minister for transport, Alhaji Umaru Dikko. Soon after this bazaar of corruption, the economy started to experience a slow down. The IMF came into the picture and proposed that the Nigerian Government adjust its currency by about 15%. Because the Naira was roughly at par with the dollar at the time, if the decision was made then, the average man on the street would not even have known anything happened. The Government did not act.
The succeeding Military Government of Buhari/ Idiagbon had their own ideas of how to run the economy. Not only will they not devalue the Naira, they were not going to repay debt payments to the numerous international creditors that became known as the Paris Club, who Nigeria, now owed millions of Dollars. As far as the Government of the day was concerned, our thieving politicians stole the money.
This dispute will lead to even more disastrous economic policies that cut credit to Nigeria. Comical policies like barter trade was pursued for a while, until the foolishness of it became obvious. The resulting debt crisis destroyed the economy. The currency decline followed steadily until the debt cancellation and forgiveness in the Obasanjo Administration. Our failure to structurally adjust our economy when it was needed is the reason we are where we are today.
Doing it at the time would have created the right economic environment for growth, those who benefited from the bureaucratic bottle necks of the control economy will not allow it. If SAP was accepted and diligently implemented as proposed at the time in the Babangida Administration, the economy would have been booming and our infrastructure would have kept pace with our development. Just as an example of how good reforms work, the banking revolution we have seen today, would not have been possible if the Babangida Administration did not decide under Olu Falae as Secretary to the Government and later Finance minister to privatize Government owned Banks. Nobody remembers today that First Bank, Union Bank and United Bank for Africa were once Government owned.
The efficiency in the banking system today replaced the terrible services we had in those days. No one can imagine that it sometimes takes 2 days to cash a cheque. The Tally Number days, when you dropped your cheque for clearing at a Bank and took a tally number that you will bring back in the evening or the next day to collect your cash. No one even remembers that these Banks in those days frequently issued their own drafts that were frequently returned for insufficient funds. We have to realize that bad economics policies have consequences.
When inflation runs rampant, and economic growth and productivity is consistently low, the Naira will never be strong, because they are the underlying factors for currency strength . The reality of what happened to the Naira is the bad economic policies that has kept inflation at an average of over 10% and interest rates at above 15% for 32 years .
Victor Ogiemwonyi is the retired CEO of Partnership Investment Company Plc .