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Nigeria’s Economic Progress: Waiting for Godot?



CRITICAL POINT IN NIGERIA’s FX MANAGEMENT: By Victor Ogiemwonyi This week has finally pushed the Naira / Dollar exchange rate closer to N1000 to the Dollar. Most people who spoke to me this week all seemed understandably scared, they fear we are going to run into a currency crisis. I have always been a long term advocate of letting the Naira find its value in the market and I have not changed my mind.There are all sorts of problems with allowing market forces work to find the true value of the Naira; but we have to get to a point where the cost of buying Dollars will change our economy for good. That is how the laws of economics will be worse before it gets better. We are at that critical point now. To be able to harness the gains, we must stay the steady course. My contribution to the FX debate since the new unification policy was put in place, was an article I wrote, a few weeks back , where I stated that the challenge now, was to maintain policy consistency That is what I am still reiterating.The only thing we have to fear is fear as President FDR Roosevelt once said.If the CBN gets into panic mode and do anything other than letting the Naira find its value, we will get into a bigger currency crisis, that will do even more harm. We should not worry about what the Naira Exchanges for, even at N1,500 to the Dollar. We should worry more about what it can purchase locally. For context, the South Korean currency, the “WON “ exchanges for 1,320 to the Dollar as I write. Why should you expect the WON to exchange for that much , despite all its industries, productivity and strong GDP and with a population much less than Nigeria, yet we are expecting Nigeria’s non productive economy , to exchange its Naira for less. It is irrational to expect our currency to out- perform our economy. Our American Nixon moment. On August 15, 1971 President Nixon of the United States, severed the link between the US currency, the Dollar and Gold. In effect, he declared that the Dollar will no longer be backed by its Gold reserves but by the American economy, which he claimed was stronger than any other economy in the world. It was a gamble, but it worked. More than 50years later, the Dollar is the dominant currency in the world, and has nothing backing it, but the American economy. Let the Nigerian economy back the Naira even though I am not saying we have much of any economy now, we will have to grow it, because the potentials are there. We are currently, the largest economy in Africa. China was poorer than us relatively, given their population in 1970. We should work toward an economically driven Naira currency value. It will be painful for 5 years, because we left it too late.All the defending of the Naira, the CBN have done with our Dollar Reserves, in the last 10 years was pure waste . It is never late to be right. If we pursue this policy diligently, we will forever be off the yo-yo rate fluctuations the Naira is currently experiencing. Let the Dollar Demand Destruction complete its course. The artificial lifestyle of consuming foreign goods when we are not productive and we do not export much, must gradually change. We must allow importation to moderate itself. The higher demand for FX will eventually weaken, when we are unable to afford some of the things we buy with FX now, the demand and supply for Fx, will align. We are spending money to educate our children abroad, spending what we can use to improve our own educational institutions locally. We neglect investing in our Health care because we can buy it abroad, when most of the people can not go to the US or the UK, they do the cheaper option of India. We spend billions of Dollars every year to import petroleum products,because we chose to neglect our Refineries at home. If we want any development here, we must focus on developing our local industries. The irony is that those who benefit from the little FX Reserves we generate, represent a very tiny percentage of the population. Any industry that can not find alternatives, for most of its raw material here, is not ideal for our economy. The only known efficient allocator of resources, is price. Let higher prices determine who and which industries get FX. Any one or entity paying anything, outside of the market price for FX, is being subsidised and we have come to know, that is not good for any economy, especially when we become dependent on it. As importation gradually goes down, local manufacturing will take up the gap and even the replacement, that may be inferior now, will eventually improve in quality and competition with other local manufacturers , will force them to make better quality goods. Higher local currency receipts as we exchange dollars for Naira, will also make more money available to the States and local governments to share, thereby re-distributing the new Naira wealth to areas where development will be nearer the people. We are already seeing this happen in the last few months. The Nigerian policy making and reforms to get the Naira stabilized, must start from creating a good enabling economic environment. Inconsistent policy making must stop. Regulators in every aspect of our economy, must be made to understand that their role, is that of enablement for the area they regulate, not to constantly play police. This will result in rapid growth, for our economy. We will need double digit growth for the next 10years. This is the only way to reduce the current massive unemployment and create wealth that will lift our people out of poverty. We already have all the positive factor inputs to enable this: fertile land for Agriculture, large population for self sustaining market to support whatever our industries produce and large literate labour market, that can easily be skilled up. We must also address the soft issues of heavy investment into education, healthcare and the present challenge of Security. We must fight corruption head on, it has corroded every sphere of life in our country. Some immediate steps that may help. The fact that the black market has now gained over N200 premium to the official rate at the I&E window, at the FMDQ, since the alignment with the black market rate in July, tells me the market , in that window is not an efficient allocator. I will advocate that, the CBN should impose a N200 premium on any price determined at the I&E window daily, until it aligns its price with the black market rate , which the people seem to perceive as the real market. This will be a way to quickly find out, who are the real economic users for FX. The CBN should come to an arrangement with all the Deposit Money Banks, to lend it all their current holdings in Domiciliary Accounts, to be used to settle verified backlogs , something tells me the media reported Backlogs, have some fluff, that need proper verification . The Banks must be incentivized to to do this, at rates to be agreed. The CBN will also accommodate this as Fx holdings for the Banks. The CBN should allowed them, value quarterly balances with the CBN at whatever the current rates are, for reporting purposes . The CBN should also guarantee the the Banks, they will be ready to provide it, with liquidity to meet depositors request, at any time so there is confidence for depositors . And finally, the CBN must find a way to rid the economy of the excess liquidity floating around, which is also the reason for the unquenchable Dollar demand. Mr. Victor Ogiemwonyi is a retired Investment Banker and writes from Ikoyi Lagos
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‘Waiting for Godot’ is a play by Irish playwright, Samuel Beckett, in which two characters, Vladimir and Estragon, engage in a variety of discussions and encounters while awaiting the titular Godot, who never arrives. This play, according to Wikipedia, in a poll conducted by the British Royal National Theatre in 1999, was voted the “most significant English-language play of the 20th century.” The play portrays the political, religious, philosophical and socio-economic perspectives to solutions of life challenges, but all end up as mere chimera—a charade.

As in the ‘Waiting for Godot’ play, Nigeria and its people have been fantasizing about the imminence of an Eldorado—economically—especially since the commencement of the Bola Ahmed Tinubu-led administration some nine months ago. Apparently playing to the gallery or in total submission to the dictates of the Bretton Woods institutions (The World Bank and IMF), the administration adopted and applied (market-led) economic policies that have caused so much disruption to the economy. This reality, though unexpected, has since bogged the administration with grappling with the negative consequences and fallouts of its economic reforms so far.

Thus, more than anything else, the government has been preoccupied with packaging and re-packaging of palliatives for the citizenry to (merely) assuage the fast-spreading and deepening poverty, hunger and anger in the land. The latest dimension of the degenerating social order is sporadic upheavals in forms of public protests in many towns and cities across the country. Public angst and cries against spreading hunger, spiking cost of living and deteriorating insecurity are pervasive. 

For close to nine months since the inauguration of the current Tinubu administration, every economic indicator has been moving in the wrong direction. Whether it is inflation rate, exchange rate of the Naira, level of unemployment, public debt, Foreign Direct Investment (FDI) or the external reserves—all have been heading in the wrong direction. For instance, while the headline inflation rate was 21.84 per cent in January 2023, one year after, end-January 2024, it has shot up to 29.90 per cent; and will surely maintain the trajectory—going forward.

Paradoxically, while several internal and external factors will keep sustaining this hyperinflationary trend, the government keeps wishing for a magical decline of the figures. This accounts for why the 2024 Federal budget is predicated on an inflation rate expectation of 21.24 per cent. Yet, the impact of the fuel subsidy removal by end-May 2023 has pushed the prices of all goods and services through the roof. Particularly, food inflation has risen phenomenally—as food supply and agriculture (especially, faming) remains threatened by worsening insecurity in the land.

Although by mere pronouncement, the government has declared a state of emergency on agriculture, the wide-spread insecurity across the country has kept most farmers off their farms. Ironically most of the areas usually referred to as ‘food baskets’ of the country are now more like ‘war zones’ as farmers in their communities, villages and hamlets are daily being overrun and displaced by terrorists, bandits, brigands and other armed gangs. Most of the surviving farmers are in their new-found-abodes—Internally Displaced Persons (IDPs) camps—in various locations across the country. This state of affairs puts the lie to the intentions of the so called state of emergency on agriculture. 

One of the upshots of this—which is lingering food scarcity—sustains the spiking food inflation trajectory. Also, in more ways than one, the peremptory floatation of the Naira and its kindred policies (as contained in the CBN’s circular of 14 June 2023 to Deposit Money Banks, DMBs) have kept the local currency on the tailspin. The sharp and sudden crash of the Naira vis-à-vis the dollar and other hard currencies has translated to very high and rising cost of importation of all items. And for the highly import-dependent economy (that Nigeria is), prices of all imports have practically gone through the roof. This is ‘transferred’ to the ultimate consumer by importers of raw materials, machineries and sundry intermediate goods.

Right from the outset, the intention of the Government in the Naira floatation policy was to attain a sustainable unified exchange rate in the foreign exchange (forex) market in Nigeria. However, for upwards of nine months now, the policy is a woeful failure. Rather than achieving a single forex rate, the official and ‘black market’ windows have kept waxing stronger—with the Naira collapsing in both of them. In fact, in the past few days, the local currency has been losing more strength in the official than parallel window. Specifically, Naira to dollar exchange rate in the official window has hit N1500/$, while it remains slightly below this in the ‘black’ market.

The upshot of this scenario has been persistent uncertainty for all economic agents, but particularly for businesses. This pervading uncertainty has been at the root of recent (almost daily) hiking of the exchange rate for cargo duties charged by the Nigeria Customs Service (NCS). The exchange rate (for duties) which was N952 per dollar in December 2023, has been raised several times in a matter of weeks, to now stand at about N1500 per dollar. And the hike has not stopped.

Already, several reports show that many importers have begun to abandon their cargoes at the ports because of the huge sums the NCS expects them to pay as duties. These cargoes are also accumulating outrageous demurrages; and all these scare the importers. Not a few of these importers have since resorted to using the port facilities of neighboring West African countries. And this is a huge loss to Nigeria. Not a few persons, too, have resorted to smuggling—rather paying through their nose to import into Nigeria—with crashing consumer demand/weak purchasing power.

As all these are playing out, the Organized Labor (OL) remains in a ding-dong with the Federal government, over deteriorating life of Nigerian workers courtesy of the recent economic policies. For the umpteenth time since June 2023, the OL—represented by the Nigeria Labor Congress and Trade Union Congress—have threatened calling out Nigerian workers on protests/strikes. While the imbroglio lingers, the standard of living of the Nigerian worker keeps declining—essentially because of the collapsed Naira and rising inflation.


This deplorable fate of the Worker has become such that the NLC is now known to be proposing one million naira as the minimum wage that it would table before the Federal government-constituted Minimum Wage Negotiation Panel. The NLC says it would index its proposed minimum wage to the high and rising inflation as well as the deteriorating Naira exchange rate: issues that have practically left the worker impoverished and hapless.

From another plank, the fuel subsidy debacle is yet lingering. Driven by the collapsing Naira exchange rate, cost of importation of refined petroleum products (especial, Premium Motor Spirit, PMS) has kept rising too. With the soaring landing cost of PMS, importers of the product have been ‘pushing’ to transfer the high cost directly to the pump (price of PMS). However, even as reported by the IMF and the World Bank, the Nigerian Government has been ‘covertly’ paying some subsidies to these PMS importers. It therefore means that like the Naira floatation initiative that failed, fuel subsidy removal policy also has not succeeded.

So, as the President Tinubu administration is about to enter the last quarter of its first year, Nigerians, and indeed, the world is waiting for the direction of the Nigerian economy. How soon will the Government move from dishing out palliatives to effectively begin to churn out policies that stimulate the economy? How soon will these failed policies be ‘reformed’ to begin to leapfrog the economy of Nigeria. Or, are we ‘waiting for Godot’?

  • The author, Okeke, a practising Economist, Business Strategist, Sustainability expert and ex-Chief Economist of Zenith Bank Plc, lives in Lekki, Lagos. He can be reached via: [email protected]               

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