The Central Bank of Nigeria, CBN, has devalued the Naira and the questions begging answers are who suffer the effects and who the gainers are. Richard Anyamele reviews...

The devaluation of the Naira did not come as a surprise to most Nigerians but that did not mellow the shockwave of the November 25, 2014 announcement by CBN Governor, Mr. Godwin Emefiele who said that the Naira would henceforth trade at N168 from N155 to the US dollar. Emefiele noted that the drop was forced in a bid to address the sources of foreign exchange demand pressure. And quickly the market reacted. The parallel market posted N182.50 (buying) and N184 for selling and so another round of Naira’s decline opens.

“The Committee was of the opinion that the economy stood to gain by further tightening of monetary policy stance to anchor inflation expectations; and some flexibility in the exchange rate to stem speculative activities and depletion of reserves,” Emefiele rationalized.

“Consequently, the Committee decided as follows; increase the MPR by 100 basis points from 12 to 13 per cent, increase the CRR on private sector deposits by 500 basis points from 15 per cent to 20 per cent with immediate effect; move the midpoint of the official window of the foreign exchange market from N155/US$ to N168/US$,” he added.

Emefiele cited declining oil prices as one of the reasons the devaluation was taken in order for the CBN to continually defend the Naira and sustain the stability of the exchange rate. Finance Minister, Dr. Ngozi Okonjo-Iweala also stated that the 2015 budget which was initially estimated at N4.8 trillion has been scaled down to N4.66 trillion. The Federal Government has reviewed the oil benchmark, cutting it from $78 per barrel to $73 and is expected to use about half of the $4.11 billion in the Excess Crude Account (ECA) to offset current expenditure.

“We are not trying to deplete it. But we might go to tap about half of it or slightly less than half to be able to meet expenditures that are crystallising at the moment that we need to make,” she hinted.

The minister said the Federal Government would not print more money to cushion the effects of the drop in oil prices as this would lead to inflation and be disastrous for the country. The CBN governor, the finance minister and everyone in government must have felt bad on the decision. No doubt, several options were examined before settling on devaluation.

Rigidity in life is bad but so also laissez affaires. Some people would prefer rigidity to carefree attitude, however. As we recall, military dictator, General Sanni Abacha held the naira at N80 to the dollar through his tenure to snub the West. It was no barrel of the gun affair but political will. Generally, exchange rates are fixed or allowed to float on demand and supply. Mostly, nations operate the combined fixed and floating scheme but an economy can be devastated by forces beyond government’s controls through foreign exchange instruments.

The fall of the naira since 1999 when the political class took over from the military is enough to imply the military are better managers than the politicians. The naira exchanged below N90 to the dollar then and today trades at N184 to the dollar – an astronomical jump by any standards.

Basic economics tells us that inflation is more money chasing fewer goods, that cheaper national currency means more expensive imports and ipso facto cheaper exports that make local productions competitive on the global market. For an economy that is import-driven and sells little consumer goods globally, the easiest way to push poverty is lower exchange rates.

It is necessary we state certain fundamentals here: you don’t tell a man to protect the wife; you don’t tell a mother to protect the child; you don’t tell a government to protect the citizens and you don’t tell the central bank to protect the national currency, jealously. These are given but then, there are times interest parties have to drum these givens strenuously – even to the rooftops.

Man tires of the wife but should think more than twice before throwing her out; a mother tires of the baby must think and rethink before casting it to the wide world.

It has been the sad reality that Nigerian governments since the military era hardly care about the wellbeing of citizens. That is primarily behind the decay in the polity and institutions of state. Had Nigeria governments cared about the consequences of state policies on the people, Nigeria would not be talking about dearth of basic necessities of life: water, light, transport, health facilities, education, food and the luxury called security, at this stage with all the resources.

Central banks have statutory duty of driving employment, productivity and consumption with fiscal policies. They have duty to check abuses in the financial system and arrest wild leakages that bleed the soundest economy to death if unchecked. Banker of last resort is the least of CBs activities.

Former CBN governor and now Emir of Kano, Sanusi Lamido Sanusi, decried the reckless looting of the treasury by those entrusted to manage our common purses. He told House members that governance was too expensive and the impact on national health was grave but he was shouted down and virtually sacked for speaking candour.

The new CBN governor was economical with the truth when he said that the economy stood to gain by further tightening of monetary policy stance to anchor inflation expectations; and some flexibility in the exchange rate to stem speculative activities and depletion of reserves.

There is reckless management of the commonwealth. Recent development in the oil market – drop in oil prices was smokescreen for the devaluation of the naira just to accommodate our profligacy and infamous tendency for unaccountability. Nothing more is at stake.

For fifteen years (May 1999 – May 2014) that politicians have been on the mantle, oil prices kept rising. Nigerians expected the naira gain strength with net inflow of petro-dollar but the slide continued. It is therefore illogical to point accusingly at falling petrol prices to justify devaluing the naira. Had government revalued the naira in the years of increased productions and high oil prices, no one would have issues with this devaluation.

The fact of the matter is the gross mismanagement of the petro-dollar and the economy in general. The federal government shows clear proofs of inability to check the abuses in currency. On the other hand, the government wants Nigerians to pay the price of the failure which is most unfair to masses that have been brought to the knees.

For persons in employment, the cut reduces purchasing power further while those without visible livelihood – and they are multitude – the devaluation pushes deeper into the morass to the very edge of dehumanisation. Immorality, corruption and wholesale abuses will rise: a policeman who would take N50 normally would insist on N100; a motor cyclist who would make do with N50 per short drop would insist on N70 and the extortionists including pimps would add marginally. Street girls and boys face a riddle: higher fare and the customers will go; maintain the old rate and more runs will be needed to meet basic needs. Head or tail, the lowest rungs suffer it most.

There is no way this devaluation will not add to food prices, rent and school fees. As the year ends, many employers will consider job and salary cuts to stay afloat. Both employer and employees are in mutual danger: dare and be damned; don’t and be damned.

The only gainers of the naira devaluation are the governments and the cohorts. Trailer-loads of Naira have been touted parked ready for the general elections that are a few weeks away. Nobody is talking real issues. A conscientious government would not have gone into this venture (devaluation) but Nigeria is one nation where governments always get away with just anything.

The Monetary Policy Committee, Nigerians were told made the decision to devalue. The presidency, the National Assembly, civil societies and the general public will take it in our strides. The promise to tax luxury goods is no comfort to those who must feel the pinch most. Everyone will adjust but it needs restating that this devaluation is one disservice too many in the life of a hapless nation populated by poor masses.

Anyamele wrote from Lagos.