CBN and Self-Delusion On the Naira Exchange Rate, By ‘Tope Fasua

Naturally, most Nigerians are extremely distressed by goings on at the Central Bank of Nigeria (CBN) of late. I am particularly worried that that institution was dragged into the politics of the time, when it neglected its policy functions to go after #EndSARS protesters by freezing their accounts in banks. I sent texts to some of the people I know in there, letting them know that the optics were terrible and there is no point putting the nation’s apex bank in harm’s way. Readers will recall that the CBN headquarters was one of the places where protesters gathered while #EndSARS went on. Whereas one could question why the protesters chose the front of a Central Bank to express their views about the police or the destination of a protest that wanted to address everything at once, it is a clear policy misstep for the Central Bank of Nigeria to insert itself into the cauldron of the people’s anger. Totally unnecessary and in fact unprofessional. If protesters had received what government deemed illicit funds, it is the function of organisations like the Economic and Financial Crimes Commission (EFCC), Department of State Services (DSS) and the National Financial Intelligence Unit (NFIU) and such like, to investigate and expose them, not the CBN.

Another concern is the recent communication from the Governor of CBN to the effect that the ‘black market’ for the naira should be ignored, as it is too infinitesimal to matter. Mr. Emefiele had strong words for no one in particular, but the content of his engagement needs to be examined. Is the black market for foreign exchange that insignificant and immaterial? In this country? What has also happened to the consistent and perennial assurances that the naira will not be devalued? Look at us today.

The other day I wanted to import some machines from China. From my experience as a bank worker who once served in the international operations department, where we assisted customers with import transactions, in the ’90s, I felt certain that the transaction was cut and dried. But I was wrong. After going through the labyrinth of online Form M completion, obtaining SON – Standards Organisation of Nigeria – certificate (another big and expensive venture), insurance and whatnot, I was laughed at by friends at CBN when I inquired if I could obtain funds officially for the import. Luckily, I had some personal funds in a domiciliary account with which the transaction was consummated. I then wondered about the point in filling all those forms, subjecting oneself to regulation and being fed upon by all the hordes of agencies. Who exactly obtains the dollar at that official rate that Mr. Emefiele extols? Maybe Buhari and his friends at the Villa. In that import transaction I referred to, the only option left open to me was to go to the black market to obtain funds in order to complete a transaction that was totally legal and official. As I type this, I have been looking for an avenue to make a payment to a company in China for some printheads. Again, Form M, Insurance, SON and back again to black market. Very tiring.

The ‘unofficial’ market for foreign exchange is extremely important in Nigeria because of its efficiency, simplicity, and relatability. Not everyone who goes there is trying to bribe someone. The sheer ease of making a quick exchange of small amounts from inside your car cannot be matched by going inside a bank. What countries do is to set limits for such transactions and enforce documentation. In every country you should be able to change money with ease. Nigeria currently has probably close to 9,000 Bureaux de Change (BDCs), which are licenses given to mostly friends and family, and currently, those lucky guys are making a kill as funds obtained from the CBN makes it straight into the so-called black market. These are funds that these BDCs are meant to have sold to travelers! How many people are traveling out of Nigeria today? To which countries? And this is a major policy plank for the CBN in managing our foreign exchange. I have written about this so many times. I know the BDC idea is now no longer tameable. Everybody who is somebody in Nigeria today has a few licenses in their portmanteaus. When the CBN started selling forex to BDCs recently, the idea was hailed by my friend, Paul Alaje, and I challenged him on Twitter. I don’t know how to join people in self-delusion. The momentary reduction in the gap between official and unofficial rates has now opened up to a gorge, again.

The history of this Buhari regime will be written as one that grossly mismanaged the Nigerian economy. From N199 to the US dollar when the government came to power, we are now inching close to N500 in the market that people can access. Yes, we have some cold-hearted speculators and smart Alecs who have taken positions for a freefall of the naira, but the policy missteps of the Buhari regime has been unnecessary. So many unforced errors actually. The drivers of these missteps were:

1. Insincerity
2. Intent to deceive
3. Corruption and inordinate search for wealth among the friends of government
4. Knowledge deficit
5. Laziness

This government took office in 2015 and since Buhari had achieved his life ambition of becoming a two-time leader of Nigeria – like Obasanjo – the ego was fairly sated and it was time to sleep and thumb his nose at Nigerians. Even though I had been under the impression that he could have made a difference at least in the discipline and anti-corruption departments, it took me less than six months to see that he wasn’t heading anywhere (Goodluck Jonathan followers should also give us a break, as that president was not a shining example). The disappointment with Buhari is what culminated in the setting up of our Abundant Nigeria Renewal Party (ANRP) and my contest for the nation’s number 1 seat. At least let everyone do something. Buhari refused to appoint a cabinet and said a lot of things that made no sense in almost a year. When crude oil prices dipped in 2016, Buhari simply asked the CBN to roll out some senseless policies, such no one being allowed to pay cash into their domiciliary accounts, etc. He also told Nigerians with children studying abroad and those who needed foreign medical care to go and look for money anywhere but through official sources (thus fueling panic in the same ‘non-existent’ black market, where the dollar rose to as high as N520 at some point), while he, Emperor Buhari, got access to cheap forex for his children studying abroad and went for check-ups and treatment at great expense to the country (selfishness and insincerity; in fact, wickedness). At this time, the CBN governor did not know his fate with the new regime and had very restricted or no access to the president.

I advised back in 2016 (through my articles) that the best way of managing our foreign exchange is to allow banks to service customer needs. Banks can be supervised, and Bank managing directors understand the need for compliance. They don’t want to be suspended from FX markets because of small infractions. If we consolidate these services with the banks, we will rely less on BDCs and the unofficial (black) market could be thus tamed with a near convergence achieved between the official and unofficial rates. It took a year for a half-hearted attempt to be made in this direction. Today, despite all the boasts by the president that he will protect the naira, the value is going straight into the toilet. I have also warned that we cannot fully float the currency, contrary to the push by some of my friends – highly educated liberals. The fact is that the naira has no anchor. We produce too little to compete, hence we can only have a managed-floating structure for now. Managed-floating buys you time while you ramp up on productivity. It has nothing to do with self-delusion and mass-deception. Almost every country does that. Like a kite, if you let go fully of the strings of control of the naira, the currency will easily float into oblivion, never to be seen again. I have warned.

Buhari’s legendary incompetence and insincerity apart, there is a need to set Governor Emefiele straight on the importance of the ‘non-existent’ black market. In any market there is what is called ‘price discovery’. This is the process of determining the market price of a commodity. In arriving at a price, policymakers and market-players survey the spectrum. By every means, even an outlying price of the commodity, no matter how allegedly illiquid that segment of the market might be, must be considered in determining where the price may be heading. This is because even outlying markets tell a story of what the people are ready to pay for a commodity. In this instance, the commodity is the dollar and other currencies. Why are Nigerians (including the saber-rattling policymakers who themselves have converted all their naira into dollars) always after foreign currencies? The answers are:

1. No confidence in their own country and currency
2. Over-reliance on importation – including for health and education
3. Difficulties in obtaining foreign currency through official sources for official transactions (as I have narrated about my own experiences above)
4. Corruption and too many documentations and bribes even for official and perfectly legal transactions
5. Also many – or most – Nigerian businesses are not straight. Many are fronts for illegal dealings
6. Speculation – believing that the naira will go to the dogs in a short while. And a currency usually does when many people feel this way.

So, I hope we get very serious and sincere about this naira problem else we are heading to Zimbabwe. I also hope the guys at CBN stand back and survey what is going on with their core functions and the institution as a whole. That institution is too important to let go, no matter who is president.

About the Author: Tope Fasua is an economist, author, blogger, entrepreneur, and recent presidential candidate of the Abundant Nigeria Renewal Party (ANRP), can be reached through

Source: Premium Times

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