| Article Index |
|---|
| Suicidal Defence of the naira |
| Les leba |
| All Pages |
The awareness of the correlation between lower naira exchange rates and increasing poverty motivated the signoff “Save the Naira, Save Nigerians!” in our articles in this column! Consequently, I should be favourably disposed to any realistic and sensible attempt to defend the value of the naira.
However, I daresay that anyone who adopts such a framework to cover budget deficits would be living in a fool’s paradise! But surprise, surprise, or own monetary authorities confidently assure us that with declining oil revenue, they chose the best option for meeting naira shortfalls in the 2009 budget and also to protect our industries! The question is whether the resultant bloated naira sums would command the same purchasing value, and cover expenditures, on both current and capital accounts, which were projected on the basis of at least 25% stronger naira values. But, this is not a problem for our policy makers; afterall, the naira can still be deliberately devalued further and container loads of naira notes printed to cover any additional shortfalls, not minding the impact of ravaging inflation and reduced purchasing power for all income earners!
Well, as if the folly of this strategy soon dawned on our monetary policy makers, we were later informed that the devaluation, even though deliberate and necessary to stabilize the economy, was in fact, the handiwork of speculators!! Now, let us examine this claim. The first pertinent question is, how did the speculators accumulate almost N2,000bn between October and November 2008 to procure over $7bn from the CBN? Indeed, it is clear that prior to the deliberate naira crash, the monetary authorities held internal consultations and sought the approval of the President and National Economic Council. In other words, some prominent Nigerians with interest in the banks were privy to the dastardly blow being prepared for the naira! It is odd that with the late passage of the budget in October and the consequent delay in capital projects execution, the Federal Executive Council still authorized 100% release of all outstanding budget provisions, not minding that with three major public holidays in view (Sallah, Xmas and New Year), there was probably less than seven weeks left in the year for completion of projects which should have been spread over twelve months. There is no doubt that the inexplicable release of 100% allocations to MDAs contributed immensely to a huge liquidity base for most banks, and significantly expanded the credit capacity in the respective banks who were beneficiaries of the huge deposits!
Thus, in such situation, it did not require an adviser with PhD in Finance to encourage the banks which were suddenly suffocated with excess naira to use their privy knowledge of impending naira devaluation to besiege the CBN with demands for unusually large dollar purchases, which they would later sell after devaluation with huge margins! Surprisingly, the CBN willfully ‘bravely’ met the demands of the banks to the tune of over $7bn in two months, when, in reality, the total foreign exchange sold by the CBN to the banks for nine months between January and September 2008 was less than $5 billion! Soon after over $7bn had bolted from our reserves, the barn door was shut and banks were belatedly required to bid for foreign exchange for only their customers, notwithstanding that major patrons of Bureau De Change (BDCs), who are largely looters of the treasury, and smugglers of contraband, continued to be serviced with admittedly reduced CBN allocations (short of the erstwhile unsolicited $3bn monthly) from our fast dwindling reserves!
Search
