The audacious outcome of the last Central Bank of Nigeria’s 98th MPC meeting in Abuja was the boldest and decisive step ever taken by the Bank (at least in the last three years). The bank officially ‘devalued’ the nation’s currency by N13. It now sells officially at N168 to the US dollar arising from the dwindling oil revenue which has taken its toll on the nation’s reserves, though the rate is higher at the parallel market. The meeting, apart from this, also took other decisions by raising the lending rate benchmark from 12 to 13 per cent, increased the private sector cash reserve requirement (CRR) from 15 per cent to 20 per cent, while it retained that of the public sector at 75 per cent. The devaluation of the naira as enunciated by the bank was to increase the volume of the local currency that will be available to the federation account and various levels of the government to prosecute their various programmes, and other development projects.
Justifying the decision of the committee, the governor of the bank, Mr Godwin Emefiele, noted that prior to the outcome of the meeting, there had been a consistent devaluation of the naira at the interbank and the BDC segments of the forex market, and in spite of CBN’s decision to exclude some items from being funded through the forex window, the dollar demand pressure remains unabated. This made the decisions imperative in order to ensure stability of the exchange rate and save the naira from its present predicament. He further said the measure was also to arrest the continuous depletion of the foreign reserves.
This decision may have provided a window to Mr Emefiele’s 10-point agenda unveiled during his maiden world press briefing on assumption of office. He had promised to use the monetary institution’s available tools to create new jobs. He also admonished the Federal Government to urgently diversify the economy and move away from its total dependence on oil revenue in order to create wealth and inclusive growth. The governor thus promised to work with the fiscal authority in making the dream a reality. As if Mr Emefiele was a seer, he had on the occasion said that the current macro-economic reality might not support an expansion in monetary policy position of the CBN, which according to him, might have enabled the bank to reduce interest rate, and encourage more investments through productive activities. This, he envisaged, would create new jobs.
The current crude oil price fall, which has boxed the unprepared Nigeria fiscal authority to a corner and its voodoo economists, the nation’s Minister of Finance and Coordinating Minister for the Economy, told Nigerians to be prepared for structural adjustments, an implication that months ahead will be tough for Nigerians. Oblivious of the attendant consequences of tight-belting on already impoverished Nigerians, the call by Mr Emefiele to divest the economy from the monolithic oil revenue base to other sources became imperative.
On assumption of office, I recalled, he had promised to create “a central bank that will not only be professional, but a central bank that will be apolitical and people-focused. A central bank that will spend its energies on building a resilient financial system that can serve the growth and development needs of Nigeria.” This, he envisioned, is achievable through a central bank that would be “the Model Central Bank delivering on price and financial system stability in order to promote sustainable economic development.” Thus, Emefiele and shortly on assumption of office promptly launched the N220 billion MMSE Development Fund intervention programme to develop the micro, medium and small scale sub-sector of the economy. The Fund aimed is to galvanize the MSME sector which has been globally acknowledged as the vehicle for economic growth, as well as reduce poverty.
Other CBN’s intervention and development programmes initiated by the bank are in agriculture, oil and gas and energy to drive growth and employment. To ensure the success of his vision, the governor had called on the private sector to support the CBN and assume an active role as development. It thus became a clarion call to the Federal Government by the CBN to seriously look inwards and stop paying lip service to economic diversification and welfare of Nigerians. The current reality has made urgent the need to develop other sectors as it is being done by other nations of the world. If present and past administrations in the country had taken development of other sectors serious, Nigeria may not have found itself in this precarious situation where the well-being of Nigerians would have to depend on volatility of crude oil price year in, year out, yet the country is blessed with numerous natural resources.
The reason is obvious. Nigerian leaders have become so lazy and un-ingenious. They lacked foresight and have never thought outside the box to develop or create wealth from other sources, but depend totally on the black gold. And unfortunately for Nigeria, while other nations were covertly planning their exit from monolithic economy as ours (in fact some have moved on as the case with United States of America), Nigeria is still day-dreaming, and unsure of the way out, coupled with incessant policy somersaults.
Ministers and other political appointees of the government who ared saddled with the responsibilities of formulating policies for the country are busy praise-singing their principal rather than provide quality services to their fatherland. As we are aware, though not surprising, the United States of America and Nigeria’s former highest buyer of crude oil and some other nations have become big players and exporters of crude oil, breaking OPEC’s monopoly. Nigeria, not learning from history, got caught again in the price free-fall quagmire. The Minister of Finance, Okonjo-Iweala, had said the economy might find it difficult to absorb the shocks ahead.
In fact, the 2015, budgetary appropriation has become the first casualty. It has been reworked to fit into the current reality and pegged at N65 per barrel of crude, but the reality is that the crude price is currently oscillating between $50 and 54, making it a very unrealistic benchmark as it stands now. The reality is that the falling price may not abate in the nearest future, more so that Nigeria’s past budgets have never been implemented to the letter even when appropriations are benchmarked at a price below the prevailing crude oil price. The Federal Government has never used the gains of the past from higher oil price for any productive venture aimed to better the welfare of its people, but have always relish in profligacy, corruption and mediocrity.
The reality is here now, staring our leaders’ and their voodoo economists’ in the face. They are currently scampering about conjuring unrealistic policies to further impoverish the people they swore to serve and protect. If those saddled with the responsibility of steering the affairs of this nation had done their bits, diversified the economy as it has always been clamoured for; Nigeria would not have found itself in this present scenario. This, again, calls for the need to elect or appoint quality and committed leaders to steer the affairs of the nation. The Central Bank of Nigeria is currently enjoying quality leadership with the appointment of Mr Emefiele as the governor. Replicating this at the fiscal and executive realms will do the nation a lot of good.
Emefiele has demonstrated the commitment and zeal to ensure that the CBN perform its pivotal role of engendering economic growth, development, and to maintain a stable and viable financial system. This is one reason why Nigerians should appreciate, commend, and support the decision of the MPC committee (though may look painful now) and several monetary mechanisms deployed to save the economy from total collapse.
It is also to be noted that, the apex bank in my view has not really devalued the currency but only announced a new exchange rate of N168/USD. The decision to up the interest rate was also arrest theundue pressure being mounted on the Naira as a result of excess liquidity within the banking sector. The unpatriotic attitude and non-adherence to the ethics of the industry by the deposit money banks as prescribed by the apex bank was also responsible for the fate of the naira. Instead of lending to the productive sectors of the economy, the banks were busy giving out loans to importers of consumable goods that are readily available or can be produced here. This was the reason why the CBN removed some items from benefitting from forex support window, yet the banks continued in their illicit trade.
Hitherto, the Federal Government had attributed what was then brewing within the rumour mills that ‘Nigeria was broke’ to the antics and evil machination of the opposition, but the Minister of Finance, Dr Okonjo-Iweala, could no longer hide the truth and had to come open to confirm what Nigerians already know, that the Nigeria is broke. While the handlers of the economy are groping in the dark, unsure of ways to salvage the current economic mess, I enjoin the fiscal authority to partner with the CBN in stabilizing and growing the economy, and particularly, the real sector. Global experience has shown that as a country grows richer, the share of its agricultural sector in GDP decreases, while the share of manufacturing and services sectors increases. However, the reverse is the case in Nigeria.
While commending Governor Emefiele and his MPC members for this bold step taken to rescue our country from the clue-less voodoo economists and administrators, noteworthy, however, in the communiqué was the advice offered to the federal and state governments by the CBN. The governor had advised the Federal Government on one hand to reduce oil subsidy payment to oil marketers as the revenue from the sector continues its downward dip, and to deploy the saved money to other productive sectors. And because the oil sub-sector has become a shady business and a drain on the nation’s reserves, perpetrated by cronies of powerful people in government, it is hoped that the Federal Government will listen to the advice, else the country may be declared bankrupt soonest.
And on the other hand, he urged state governments who always go to Abuja with caps in hands to ask for handouts to be ingenious, creative and look inward instead of dependence on the center is instructive. They should look inwards and improve on their internally generated revenues to cater for their development programmes. The CBN governor has not reinvented the wheels but only re-echoed what many economists and financial technocrats have always advised.
But can Emefiele drive his vision alone without the support of the fiscal authority? While he diligently pursues his vision to create a central bank that would not only be professional, apolitical and people-focused, it is hoped that he will not be dissipating his energies on building an institution that will not only be resilient but that can also serve growth and development needs of Nigeria without the needed support from the government. And if the economy as, recently rebased, is to remain the largest on the continent, the Federal Government must cut down on its waste, profligacy, and white elephant projects that are not adding values to Nigerians and the economy. More importantly too, the thieves in government who daily loot the nation’s treasury with impunity must be brought to justice.
In conclusion, though this applaud able, bold and audacious paradigm shift to rescue the nation’s economy has attracted mixed reactions and criticism from many quarters, the ‘devaluation’ has speculated may further fuel unemployment and aggravate inflation. It should, however, be noted that the measures taken were designed to boost non-oil revenues, plug loopholes and wastes in the government. How we got to this sordid stage does not matter anymore, but how to retrace our steps and get back on track, in my view, is the preoccupation of the CBN’s management now. Governor Emefiele’s leadership and vision may be what Nigeria needs urgently to get the economy out its current doldrums.
This contribution was from Ademola Bakare, an Abuja-based media practitioner.