THE
naira was one of the world’s strongest currencies – far stronger than
the American dollar - until the mid-1980s when its free fall started.
The sharp drop in the value of the naira was occasioned by the Nigerian
Government’s acceptance of the Structural Adjustment Programme (SAP) of
the International Monetary Fund (IMF). In spite of the fact that
notable Nigerian economists vigorously opposed the harmful package of
the IMF, the government embraced it and the value of the naira has since
been a story of progressive decline. What was recommended as an
antidote to third world countries’ ailing economies ended up as a deadly
poisonous prescription. The IMF long after came out to accept that SAP
was an inappropriate answer to the problems of third world economies.
The same IMF, the author of the ruinous economic programme of the
1980s is at it again. It has been calling for an adjustment in the value
of the naira. The Emir of Kano, Muhammadu Sanusi and some university
dons have also been reported to have joined in the campaign for a
further reduction in the value of the currency. The IMF has been
particularly critical of the actions taken to limit access to foreign
exchange by prohibiting the importation of certain goods. The argument
is that the government should allow the naira to find its level.
Our expectation is that Nigerians will question the interest of the
IMF in the value of Nigeria’s currency instead of joining in the
agitation for a reduction in its value. It should not be difficult to
recall that the devaluation of the naira and other harmful
recommendations of the IMF had disastrous consequences on the economy
and quality of life in Nigeria and many other countries that embraced
SAP. There was a sharp increase in the cost of imports, large-scale
de-industrialisation and massive job losses. Factories either closed
shop or relocated to other countries. Products that were being produced
in the country are now being imported.
The current wave of devaluations started in the last quarter of 2014
when the exchange rate of the naira to the dollar was adjusted from 155
to 168. The current rate of 197 naira to the dollar shows that the
value of the currency has dropped by 27 per cent in the last one year.
With another round of devaluation, there will be another round of
inflation. The purchasing power of Nigerians will be reduced because the
naira will buy less. The cost of imported materials for industrial
production will go up and the cost of products and services will rise.
Industries that have been struggling to survive decades of economic
downturn will be further disadvantaged. Their higher costs of
production will not enable them to sell at competitive prices. They
will be unable to take advantage of the large market that Nigeria is.
Devaluation will thus have a telling effect not only on the industries
but also on the quality of life of the ordinary people.
Nigeria is not an industrialised country producing and exporting
finished products. Industrialised countries at times resort to
devaluation to undercut their rivals to enable them to get a larger
share of the market. Nigeria is an import-dependent country . It is a
massive market into which all forms of goods are dumped. Its main
source of revenue - the crude oil - is exported in raw form with no
value added and it is priced and paid for in American dollars. What
then will be the benefits that will accrue from a further reduction in
the value of the naira?
President Muhammadu Buhari , Vice President Yemi Osinbajo and
Central Bank Governor Godwin Emefiele have spoken in unmistakable terms
about the resolve of the government not to further devalue the naira.
Our fervent hope is that they will stick to their guns in the defence of
whatever remains of the naira. If the massive devaluations of the
1980s and 1990s did not solve the country’s problems, it will not solve
it today. The government should explore the options of strengthening and
diversifying the economy.
There has always been the contention that the devaluation of the
currency will discourage the importation of items of ostentatious
consumption. It is a flawed argument in a country in which public
office holders have been abusing their access to the treasury to steal
even what they do not need. The control on foreign exchange should be
stringent enough to stop the importation of what can be locally produced
and what can only serve the purpose of showing class.
It should not be lost on the agitators for devaluation that Nigeria
is a country that has been stolen blind by its own leaders. Continuous
devaluation of the naira will be adding value to stolen funds in foreign
vaults. The health of the economy and the interest of the populace
should be the primary objective of fiscal and monetary policies.
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