By Joni Akpederi
What’s the value of the naira, Nigeria’s embattled and much-maligned currency, especially its cross-rate against the dollar and other so-called hard currencies of the world? Now, this sounds like a stupid question, doesn’t it?
Verily, verily I say unto thee, it isn’t, for, no one knows. Not even the Central Bank of Nigeria (CBN), the organ mandated to create, tend and nurture the naira to health in all circumstances, auspicious or less so.While the country’s authorities and official communication outlets reel out a set of rates set by the Central Bank for it’s many windows, the general populace is more attuned to the parallel market which is not as constricted, illiquid and frustrating. A couple of weeks ago the open “people’s” market reckoned the naira to worth N7I0 against a single US dollar way ahead of the Central Bank rate of about N415 to the dollar. The insane N295 has inevitably fuelled an unending speculation frenzy that is sure to keep the embattled currency yo-yoing while maintaining a perpetually dive in the short to medium term. At this piece’s press time, it had slid slightly to N695, a position that gives no cheer either in the so-called parallel market or the official circles.
Regrettably, the naira has had a terrible time in its sustained losing streak over the past three or so decades. Lately, the nation’s aviation actor has been most vociferous in its complaints the harm the currency is wreaking to its finances. Major foreign airlines are naira-shy and are surreptitiously declining to accept the currency for their services fearful of reprisals from the government. Some, like Emirates, simply cut the number of flights they operate to Nigeria to stem what they term losses from the naira’s dive and their inability to repatriate their earnings and timeously to their home bases.
Here at home, the fallout of the naira’s crash is catastrophic. It has unleashed the wildest inflation on the nation’s history with fears of its degenerating to Zimbabwean levels. Prices are so volatile; no contract remains valid for more than a couple of days! Since Nigeria’s economy has been mismanaged into full-blown import dependency, virtually ever product in the market is either wholly imported or contains a good portion of imported inputs. This means that the dollar, which is getting scarcer by the day, is a prerequisite “ingredient” in the mix of factors of production.
The “custodian” of the embattled naira, the CBN, has tried a load of policy tricks — orthodox and unorthodox, ranging from the sublime to the downright ridiculous — to tame the errant currency to no avail. In the early days of the current Bank management, the Governor was roundly derided as the “toothpick Governor” by an international media company. Governor Godwin Emefiele and his team had closed access to the official foreign exchange market to importers of commodities and products that they deemed unnecessary or easily made in Nigeria. They argued that such importers were crowding out those engaged in serious economy – boosting businesses, and had blacklisted axed 45 items including the humble toothpick.Needless to say, affected businesses simply moved over to the parallel market where the only encumbrance was the higher cost of the dollar they sought.
When the toothpick policy proved to be ineffective in taming the unruly naira, the Bank dismantled its policy of direct allocation of foreign currencies to bureaux de changes, which was earlier touted as the magic solution to the problem of unauthorized dealing in foreign exchange popularly called black or parallel market. The Bank has been seeking ways to “kill” the open market, which it blames for much of the naira’s woes and the ineffectiveness of its own foreign exchange policy. It went back to its old abandoned policy of dealing only with authorized deposit money banks in the country.
As critics expected, the result has been: “same of the same”, with a palpable fear that the naira was on set to cross the sanity threshold. Many were quick to point out that it was absurd for the regulatory authority to hope for any other result. The Bank has been juggling all manner of policies but the one all modern financial experts including those in at the International Monetary Fund (IMF) and the World Bank, have been recommending viz: allowing the naira to find its true value and feet by allowing it to float freely against other international currencies.
In sum, the CBN really cannot continue to do the same things over and over again, ignoring all entreaties and ideas but those emanating from the echo chamber of its own four walls. It’s time to let in fresh air from without.