Currency War - Where Does Nigeria Stand? II
The Financial Times (FT), 21 November 2010 edition, reports the IMF's support for Hong Kong dollar's pegging to the greenbacks (U.S. dollar). This is in spite of the effect that policy is having on inflation in the property market in the tiny island recently. The pegging had worked well for Hong Kong for more than 27 years, the FT continues. "This exchange rate policy is the right one for Hong Kong," says Nigel Chalk, a senior IMF official, to the Financial Times. This corroborates my call for a revisit to naira's divorce to the dollar. Now then, why is that policy not right for Nigeria? Who are those conspiring to prevent Nigerians to even revisit or debate the issue of Nigeria's exchange rate policy.
The conspiracy theory could be a figment of imagination, but when Soludo, towards the end of his tenure, muted the idea, he was shouted down and could be one reason why his contract was not renewed. Soludo, however, had his shortcoming. Should that be the case, then Nigeria is in serious trouble - economically at least. A policy, any policy at all, is for a purpose. Our exchange rate policy since 26 September 1986 was ushered in after a debate. Whose purpose has the Nigerian naira's divorce to the greenbacks policy served?
It is treacherous for any informed Nigerian not to remotely link the dismal performance of Nigeria's economy to this exchange rate policy. It has been 24 years of a faltering state of our economy in spite of the country's potential. Of course there was a problem at the time that begged for a change, but that was then. Why are we not discussing it? I am not advocating for a change yet, but why is it not on the table for discussion.
Are we unwittingly waiting for IBB to come onboard before we can talk about it? Unfortunately, it seems so. Even IBB was bold enough to put it on the table for discussion that time. Is this the reason why IBB wants to come back? He must be thinking that in spite of the flawed system that he left behind, nobody has been man (bold) enough to effect a change in our social-economic life.
This writer is a layman in the field of economics and should not be the one advocating for a debate on an issue that he knows little. However, the use of cause and effects to arrive at a posit cannot always be the preserve of the experts. I have often searched for the most fundamental cause for our social/political/economic derailment, and not the superficial cause of each component, but of its entirety. Each time, I have always narrowed it down to the exchange rate policy.
Without much thinking, it looks like a warped fixation. That's where my fixation, if you can call it that, is vulnerable or flawed. However, there are just too many coincidences to ignore. How do you explain the timing? Our most valued assets, the Brain, (brain drain) started migration shortly after the introduction of the exchange rate policy. Our factories started closing down from that same day - from 79 textile mills in 1986 to zero textile mill in 2008. All the tyre; battery; car assembly, but one; oil refinery; power; transportation, etc. industries have all taken a knock since that day in 1986.
The other day a research body stated that Nigeria has topped the rest of Africa in annual remittances of over $10 billion U.S.D. This is the money Nigerians in the Diaspora sent home to Nigeria. It's a big achievement to little minds, but a fraction of what Nigeria could have earned in production had the Nigerian brains not been drained to other lands outside Nigeria. In October, I visited some friends in Canada and the U. S. who are doing very well, but wished they were back home. The most damning is the future of our children. Since 26 September 1986, opportunities for our youth in gainful employment have shrunk. This is in spite of the vacancies created by those seeking greener pastures.
One of our misconceptions is the value of the naira against other major currencies. It is never the value of the naira itself, but the method used to derive that value. It would not matter if a dollar is valued at 10 naira or 1000 naira. Presently, that value is derived through the Dutch Auctioning of the petrodollar at the Central Bank. How does that policy affect everything? It does because it lacks commitment to the Nigerian dream. Once in a while, foreign companies operating in Nigeria sell the dollar to pay local salaries and pay rents, which momentarily affects the value of the naira. The government also use the policy to fill the gap in budget deficit, which largely affects the value of the naira. In the end, it is the local production (mass employers of labour) that suffers - the locally produced goods (agricultural, manufactured and services) find it hard to compete with imported goods. All these because of an "innocuous" exchange rate policy.
Utilitarianism is the belief that the value of a thing or action is determined by its utility and it is the ethical theory that all actions should be directed toward achieving the greatest happiness for the greatest number of people. This was a doctrine founded by Jeremy Bentham (1748-1832), a British philosopher, an economist and a jurist. He became well known, in 1789, for his "Introduction to the Principles of Morals and Legislation. Borrowing from his ideas of the useful and the good, Bentham concluded that, ÔÇśNature has placed mankind under the influence of two sovereign masters - pain and pleasureÔÇŽ they govern us in all we do, in all we say, in all we think; every effort we can make to throw off our suggestion, will serve but to demonstrate and confirm it.' Our sorry state negates that doctrine.
Samuel Akinyele Caulcrick, Zaria.