Dollar to 
Naira Converter
BY DELE SOBOWALE
“Love and business and
family and religion and art and patriotism are nothing but shadows of words
when a man is starving.”O. Henry, 1862-1910.
VANGUARD BOOK OF QUOTATIONS p 232.
The Federal Government
of Nigeria is doing a wonderful job fighting corruption. The last time this
monster was tackled, head-on in this country, was in 1984, by the same Head of
State Buhari. Then as now, the price of crude oil created the havoc. Then, as
now, there were discordant views about whether or not the government should
devalue the currency or not. Those on the left wing of Nigerian politics, the
Nigerian Labour Congress and socialists who arrogated to themselves the love of
the masses, were against devaluation of the currency.
The usual argument is
that it will lead to inflation which will negatively impact the masses. The
only price increase the NLC favours is wage increase because in their own books
of economics wage increases don’t increase the cost of production of goods and
services. That one sided and somehow inaccurate reading of economics has always
been at play in this country – led by many who either never studied the subject
or failed it.
However, the Federal
Government might be making a drastic mistake if the leaders think that fighting
corruption is substitute for putting food on the table. The two are not
mutually exclusive and prolonged starvation might even undermine the fight
against corruption. Hungry people everywhere don’t care who is jailed. Unless,
this perceived monomania is corrected, neither the battle against corruption
nor mass starvation will succeed in the long run. President Buhari must turn
his attention to the economy. NOW!
The truth is “No
government deficit [or any other measure known to man] can create inflation
unless the quantity of money [in circulation] goes up.” (G. Haberter, in
INFLATION, ITS CAUSES AND CURES, VBQ, p 103). Everybody knows that the
classical definition of inflation means too much money chasing too few goods –
irrespective of whether those goods are imported or produced locally. Nigeria
remains an import-dependent nation; and we all contributed to making it that
way and we have not even started to control our appetite for imports. As long
as imported goods constitute a significant percentage of our consumption, we
must be prepared to find the dollars to import those products.
On Wednesday, February 17, 2016, the PUNCH
tucked into page 28 a story which should have been headline news instead of the
usual “EFCC said” stuff. The report by Femi Asu read as follows. “Nigeria’s
March crude programme is struggling to find outlets, with some 25 million
barrels still unsold even as the April programme is expected to start
arriving this week.” For those who might not fully grasp the meaning of that
report, it needs to be explained fully because it illustrates the catastrophe
confronting us as a nation.
Twenty five million
barrels unsold, given a budget calling for export of 2.2 million barrels a day
means that the country might not dispose of eleven days production. So on
volume alone the deficit is 35 per cent. Simultaneously, the budget was
benchmarked on $38 per barrel. Instead the March deliveries are going for $32
per barrel or 16 per cent less. Altogether, Nigeria will suffer revenue deficit
on account of crude oil of close 22 per cent, after all deductions have been
made.
That would have been bad news enough. But,
January and February sales were also below budget levels. So, by the end of the
first quarter, the nation would have suffered a deficit of close to 25 per cent
for the period under review. Meanwhile, the non-oil revenue sources have not
started to deliver the surplus that would cushion the impact of the fall in
crude oil income.
Adding to the nation’s
economic woes is the rapidly dwindling external reserves which had been reduced
by close to 23% in the last one year and are unlikely to rise in 2016.
Every economic index known to man calls for an
urgent decision to be made by the Federal Government before all control is
lost. A conference held last week had the Governor of Edo State stating his
opposition to devaluation. He was ably supported by the Labour representatives
present. However, they failed to tell Nigerians what government is supposed to
do when imports exceed the foreign exchange earnings of the country and what is
to be done when the external reserves run out or get so low as not to be able
to support our level of imports or external payments. Often forgotten is the
fact that some states of Nigeria, the Federal Government, banks and private
companies have incurred loans denominated in dollars and which they must find
dollars to repay. The dollars are not forthcoming in the quantum required to
meet our obligations.
President Buhari had been focusing on the
battle against corruption and on external affairs. There is no discernible
individual in government who is responsible for the economy. The Vice President
who had made some comments on economic policy had ended up confusing the
nation. He was the one who first announced that N8 trillion would be spent in
2016; that the 2016 Budget now languishing in the National Assembly, will be
based on Zero Sum method and that the nation targets $25 billion loan to help
fund the budget. The first two had turned out to be mere play on words the
third will depend on whether or not foreigners and even Nigerian investors have
confidence in our ability to manage our economy.
The acid test of whether
a nation can manage its economy is the health of its currency. Right now, even
the best propagandist the Federal Government can appoint cannot convince
Nigerians and the global community that all is well. A free-falling currency is
a sign of deep trouble and nothing keeps investors away better than that. Even
now, the free-fall of the naira is partly caused by capital flight. Those who
had adopted a wait and see attitude, wanting to see how this government will
manage the economy, are no longer waiting because they have seen enough.
Dr Arthur Burns, the Chairman of the Federal
Reserve Bank in the USA, equivalent to our Governor of the Central Bank, once
said that if a nation allowed an untenable economic situation to persist for
too long, suddenly, there are no good options left.
Nigeria is slowly but
surely approaching a situation where there are no good options left. Even now,
the options have been reduced to few. But, another delay will spell doom.
http://www.vanguardngr.com/2016/02/naira-in-tatters-buhari-must-act-now-or-lose-control-completely
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