A little over 24 years ago, Nigeria, with a gun to her head, acquiesced and broke her biblical cord with the world reserve currency, the U. S. dollar. It was the minimum condition given for Nigeria's economic growth by the two Washington financial institutions, the World Bank and the IMF. This was in spite of the backdrop of Nigeria's major earning, oil, being already priced in the U. S. dollars - a logical reason while the naira should have been left with parity with the dollar. Nonetheless, our local, Western educated, economists convinced us to listen to the two Washington institutions, who, at best, were masquerading in our interest.
Since that day in 1986, utilisation of Nigeria's installed capacity in production of whatever has been shrinking. In retrospect, the Nigerian economists, who helped to actualise this suicidal move, could be classified as either plain stupid; or had wittingly, or unwittingly committed treason against the nation. From the day we broke the biblical cord that tied the naira to the U. S. dollar, our stride in factory-floor production was curtailed and the Nigerian economy has been in a tailspin.
In 1986, China was just emerging and must have watched spellbound, what was unravelling with the Nigeria's economy. Investors took to their heels and left Nigeria in droves. Do you remember the motor assembly plants, etc. China, it seems, learned a lesson - don't ever go the Nigerian way. China, therefore, glued its currency, yuan, to the American dollar. By 2005, China had overtaken Germany as the third largest economy, supposedly with this policy and of course through hard work.
The West panicked, and turned the gun to China's head. It forced China to break it's biblical cord with the American dollar. China acquiesced in 2005, but in 2008, during the world economic meltdown, when Chinese factories started closing down, China yet again tied it's currency to the American dollar.
The present imbroglio is nothing but trying to convince China to break its currency tie with the American dollar. As it is, China's currency cannot fall against the U. S. dollar, because of that parity. China sees what America is asking as suicide, and has realised that as an emerging economy, you have to hold on to the robe of a strong economy; otherwise, one would be trampled over, as Nigeria has been.
What is the significance of a tie to the world reserve currency? There is only one advantage, and that is cost of labour. The advantage of the cost of labour in production and trade, is only evident with a tie to the currency of world trade, the U.S. dollar. In a deregulated exchange rate, the West easily manipulates, and eases out the advantage of cheaper labour. Which is why in spite of one of the world cheapest costs of labour with a minimum wage of about $50, Nigerian factories find it hard to compete with imports, and have been closing down ever since.
Don't just mention power! It is becoming boring blaming lack of electricity for our underdevelopment. It is the laziest mental delusion of the Nigerian psyche. Lack of power is not helping matters, but it is also a byproduct of our deregulated exchange rate. It is the deregulated exchange rate that has killed the refineries, power, the railways, the airlines, shipping lines, mass transit, etc. The reason was simple - the level of the state of our technology meant there was a high content of foreign currency needed for parts and machinery.
It was the deregulated exchange rate that brought about the taunted state subsidies, the unreasonable tariffs, increasing quest for higher minimum wage and salaries. It brought uncertainties to the Nigerian economy. Why is Nigeria unique? The advantage of it's huge size that could have been harnessed for mass production was, and it is still being watered down by the deregulated exchange rate.
It is not all bad news for our deregulated exchange rate, if one critically looks at it. It has unproductively capitalised our public sector. Government does not have to bother to make Nigerians pay tax. Government treasury is funded by the proceeds of the Dutch Auction of the petrodollar. That looks ingenious, but in itself it is fuelling corruption. It is the magnet that is attracting all of us to Abuja, the state's capitals or the City Hall; and we are all dying to get there. As we watch China and America slug it out on the currency war, in Seoul, South Korea, what goes on in the minds of our celebrated economists? Is it apathy or genuine concern? There is nothing like easy money, which oil has provided.
Mr. Samuel Akinyele Caulcrick, Zaria.