Anarchy In The Economy:No Dollar To Buy

The acute scarcity of dollars which hit the Bureaux De Change segment of the foreign exchange market, following the new policy of the Central Bank of Nigeria (CBN) not to sell forex to BDC operators, worsened yesterday as the naira hit an all-time low of N189 to the dollar.

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Rate fluctuations

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There are no specific reasons apart from the fluctuations in the rates of the assets and currencies that makes things possible and easier online.

The Nigerian currency’s value has been depreciating on a daily basis, sometimes collapsing twice or more a day.

The dollar sold for N186 in the morning yesterday, but by the time LEADERSHIP went to press last night, the American currency was selling at N189.

Despite the massive depreciation of the naira in the forex market, majority of the BDC operators were not selling dollars to end-users yesterday because they were afraid that the CBN would revoke their licences if they were caught.

A source in the forex market in Lagos attributed the scarcity and consequent massive depreciation of the naira to hoarding by BDC operators, who were suspicious of strangers and would only sell to familiar faces.

The CBN allows the BDCs a maximum spread of two per cent of the official rate. The apex bank currently sells forex to banks at N146.28 to the US dollar.

It could be recalled that the CBN recently came up with a new directive which divided BDCs into categories, stating that each existing BDC could remain in operation as category B operator while only operators who meet the requirement to operate in category A would be allowed to access foreign exchange by the apex bank.

It said that the operators who want to upgrade to category A must meet a minimum paid-up capital of N500 million verifiable at all times, mandatory deposit with the CBN of $200,000- non interest bearing and non-refundable application fee of N100,000.

Other requirements include licensing fee of N1 million, annual renewal fee of N250,000 (subject to satisfactory reporting requirements and performance and minimum information technology infrastructure that enables the BDCs to make daily returns to CBN.

However, as a result of the directive, the naira, which exchanged at N172 to the US dollar on Tuesday depreciated further to N185 at the close of business transactions on Wednesday.

The BDC operators who confirmed the development said that the free fall in the value of the naira was due to shortages in the supply of the foreign exchange market.

They stated that the demand pressure, which outweighed supply, intensified immediately CBN stopped supplying forex to BDCs.

They explained that the fall in oil prices due to global financial crisis which reduced the Federal Government’s earnings, has made it more difficult for the apex bank to meet the forex demand that is rising on daily basis.

Financial analysts said that with the current situation the naira would depreciate further next week as BDCs resorting to autonomous market would provide an opportunity for banks to continue engaging in round-tripping since they are the only group allowed to bid in the twice weekly foreign exchange market.

They pointed out that officially banks are the only group that determined the rate the BDCs will sell their own forex.

Analysts said that with the global financial crisis it would be difficult for BDCs under category B to remain in business through autonomous sources because majority of Nigerians abroad who boost forex inflow to the sector by sending money to their relatives home are finding it difficult to do so.

Meanwhile, the Chairman of the Nigerian Economic Summit Group, Mazi Sam Ohuabunwa, who called for the full deregulation of the oil sector, said that the high demand for foreign exchange was because a substantial amount of dollars are used for importing fuel instead of developing the infrastructural facilities.

He said that the report on the CBN sales of the foreign exchange has shown that majority of the forex users are fuel importers.

The NESG chairman said that deregulation of the downstream sector of the oil industry will give the government an avenue to invest in other sectors of the economy instead of importing fuel.

Some parallel market operators who spoken to our correspondent in Abuja on the condition of anonymity said that the exchange rate hovers around N187/N189 to one US dollar, depending on some factors.

These factors, they said, include the total value of sale to each buyer and the availability of forex at the time of sale.

At the old Durbar Hotel Kaduna, a young man doing exchange transaction told LEADERSHIP, “Sincerely it is a worrisome situation because the demand for the dollar increased and we cannot satisfy the increasing demands on a daily basis. We now sell one US dollar at the rate of N189 , while we buy at N185.’

At the Hamdala Hotel area, many of the Bureaux De Change staff refused to talk to LEADERSHIP, insisting that it was only their chairman, Alhaji Shuaibu Abdullahi Shanono, that was in a position to comment on the matter regarding the price and reasons that could be adduced for the rising price of the US dollar along with other foreign currencies like euro and pound sterling.

But another business man who operates in the exchange transaction said, “The way and manner the price of the American dollar is rising is a serious concern to any sensible Nigerian.

“Global financial crisis or not, we need robust and genuine effective strategies by the apex bank in checking the repression of such trends aside the normal challenges in protecting the financial security of the country. Now we are selling the US dollar at N188 to N189. To answer your question, the answer is simply the failure of our regulatory agencies to fashion out reliable strategies”.

However, the Special Assistant (Media) to the CBN Governor, Mr. Isaac Okoroafor, told LEADERSHIP that the official exchange rate has ranged from N144 – N150 to US$1 since mid-January 2009.

His position has not changed from the statement he issued last Monday which stated that this is the exchange rate for about 95% of legitimate foreign exchange consumption in Nigeria.

According to him, the objective of the current foreign exchange rate policy is to conserve foreign reserves and ensure stability of the exchange rate. He also reiterated that the CBN’s measure is succeeding and that the outflow of foreign exchange has reduced by more than 50 per cent.

The bank had also disclosed that the policy will ensure that even if the global crisis lasts for the next three years, Nigeria will continue to meet all legitimate foreign exchange demand at a stable exchange rate.

“Other complementary on-going reforms will significantly affect the parallel/black market exchange rate soon. Once the global crisis abates, the Naira is expected to strengthen”, the statement added.


The Vague Future Of Nigeria

Lord Lugard, the former governor-general of Nigeria, in 1926, wrote his unfiltered thought about Nigerians. From his book, The Dual  Mandates, come these excerpts: “In character and temperament, the typical African of this race-type is a happy, thriftless, excitable person, lacking in self-control, discipline, and foresight. Naturally courageous, and naturally courteous and polite, full of personal vanity, with little sense of veracity, fond of music and loving weapons as an oriental loves jewellery. His thoughts are concentrated on the events and feelings of the moment, and he suffers little from the apprehension for the future or grief for the past. His mind is far nearer to the animal world than that of the European or Asiatic, and exhibits something of the animals’ placidity and want of desire to rise beyond the state he has reached.

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“Through the ages, the African appears to have evolved no organised religious creed, and though some tribes appear to believe in a deity, the religious sense seldom rises above pantheistic animalism and seems more often to take the form of a vague dread of the supernatural. He lacks the power of organisation, and is conspicuously deficient in the management and control alike of men or business. He loves the display of power, but fails to realize its responsibility – he will work hard with a less incentive than most races. He has the courage of the fighting animal, an instinct rather than a moral virtue. In brief, the virtues and defects of his race -type are those of attractive children, whose confidence when it is won is given ungrudgingly as to an older and wiser superior and without envy. Perhaps, the two traits which have impressed me as those most characteristic of the African native are his lack of apprehension and his lack of ability to visualize the future.”

I have read so many responses to these excerpts on the internet. A few of the Nigerian respondents disagreed with Lugard’s assertion, but a majority of those who commented agreed with the former governor-general’s assessment of Nigerians. Those who remarked that his views of our people were imperialistic undermine the real state of Nigeria today. As we take a critical look at his analysis, any rational Nigerian can actually see that we do not visualise the future of this country, especially by the decisions and actions of our leaders. Nigeria, in all ramifications, has not improved since the time of Lugard. Our living standard is constantly on the decline and, of course, there is no hope for the future as our tertiary schools have become worthless. There is no way we can plan for the future of our children without constantly reinforcing our educational standards. The future of this country is plagued with obscurity. No view and no vision. The rat-race attitude of changing the tides of our academic values at will can only bring forth a generic qualitative education that will always be below standards in comparison to anywhere else in Africa (let us not even think of other more serious continents).

Prior to independence, Nigerians embraced a sense of nationalism. The reason was simple: we needed to unite to fight against what we termed, then, imperial colonial masters. That unity gave us strength to evolve as an entity. Soon after independence, about six years to be precise, that nationalism gave way to suspicion and unrealistic desire to secede. Regional and tribal affinity became the ultimate voices of recognition as the three regional leaders fought separately to secure social and economic freedom for their people, while at the same time preaching allegiance to the federation. Lord Lugard’s emphasis on our leaders’ quest for power and authority without knowing the responsibilities attached to such positions is highly visible today, and I challenge anyone who can refute this assertion. This country does not live with the dictates of reason. We shy away from basic realities but at the same time look towards an illustrious future that will never be.

Nigerians were exalted to the highest level of hope when probes of former public office- holders started about 15 months ago; but, not even the greatest believer in our midst can hope for any retribution or restitution soon. Probing of public officers is as unexciting as the next arrest of armed robbers on our roads. Corruption, as part of our cultural values, has been entrenched into our generation and those younger. The future of Nigeria, to me, is as vague as our imagination of life after death. Gross unemployment and growing hopelessness have rendered our youths, especially those who have paper qualifications, restive. Despondence covers the panorama of the future.

Nigeria is heading back, again, to the International Monetary Fund (IMF) for redemption. This is another classic example of Lugard’s assessment when he said “his thoughts are concentrated on the events and feelings of the moment, and he suffers little from the apprehension for the future or grief for the past”. We have learnt no lesson from our previous romances with the IMF, and will never learn from the mistakes of others. The Structural Adjustment Programme (SAP) and Austerity Measures, which were introduced during our earlier marriages to the IMF in the 1980s, have thought us nothing because leadership is not a continuum in this country. Argentina, which had been considered by the IMF to be a model country in its compliance to policy by the Bretton Woods institutions, experienced a catastrophic economic crisis in 2001 as a result of IMF-induced budget restrictions. Nigeria never recovered until the Paris Club magnanimously wrote off our debts about three years ago. Our dreams of personal vanity have erroneously eroded our vision for the future of our children, and since tomorrow should plan for itself, enriching other countries with Nigerians’ looted funds can also attest to the vision of moving this country forward.

As we plan to revisit the IMF, there will ultimately be devaluation of the naira and another cycle of debts will hang on the next generation, while our imaginary foreign reserves deplete by the hour.

The drive to go back to the IMF raises so many questions about how constitutionally oil revenues must be distributed to states and local governments to spend at will, without any form of accountability. The majority of Nigerians pay for the executive recklessness of our political office-holders, and we cannot even demand retributions but suffer the scourge.

In this age of great enlightenment, Nigerians cannot decide who should lead them, since votes are mere symbols of compliance to democratic norms. Election process is marred by deception, diversion and delusion as we claim political and economic stability in a nation devoid of hope for the future of our youths. Nigerian politicians suffer from lack of comprehensive system of beliefs and attitudes about social and economic institutions and processes – this system is what political scientists call ideology. Survival of the fittest is the core reason for political alignment and mass migration of politicians towards the party in power. Consensus is based on monetary value and, as we loot and loot our own treasury, the next cycle of politicians watch, with nostalgia, the crooked process of assuming office by all means. Death can also be the alternative to losing.

By throwing away common sense in managing our windfalls from oil revenue, the dwindling effect of global economic recession will soon bring down, below budget, the price of our oil. Then, what next? Of course, the art and science of stealing will never stop until the whole nation sinks into violence. Clearly, this feudal edifice must not be allowed to survive, as tomorrow looks very vague.