Forex auctions and pampered businesses

A community kitchen would be a fascinating place, very much like our Central Bank. We feel entitled to be served with all the staples, side-dishes, delicacies, water and assorted juices, but nobody wants to know how the farms are doing, or where the money to go to the market will come from. Everyone wants to […]

A community kitchen would be a fascinating place, very much like our Central Bank. We feel entitled to be served with all the staples, side-dishes, delicacies, water and assorted juices, but nobody wants to know how the farms are doing, or where the money to go to the market will come from. Everyone wants to eat, some want to be cooks but nobody gives a damn what is there to be cooked. Nigerians want rice and cheap dollars, period. This has beclouded the popular debates about devaluation, import policy and even the suitability of the entire economic direction.
Wherever you are these days, all you hear are lamentations over the price of rice, even from people who hardly ever eat the stuff. Not the rice we farm locally but the parboiled rice from Thailand, and elsewhere in Asia, that we have become dependent on. The dollar, we all say, is too expensive but nobody is telling us how much it should exchange for. However, as every trader knows, if you want something from someone you have to give that person something he wants. In this case, if you want foreign rice, chocolate or toothpicks then you have to come up with foreign currency. This way, they too can buy what they want from you or from someone else. Usually we approach our banks or BDC, pay for the dollars in naira and go shopping for what we fancy. It works well provided the CBN has enough foreign currency reserves to cover our import bills. This works smoothly, most of the time. We sell oil, gas and a few other items in dollars and keep importing whatever we fancy, off to Dallas, Dubai or Disneyland, go to foreign hospitals when we catch a cold or send our kids to school abroad.
Trouble is, oil and gas are commodities subject to the laws of supply, demand, prices and geopolitics. When times were good we simply spent more. All the balance was shared to the Governors who had Jonathan by the jugular, according to his finance guru. Now the CBN is saying it has about a billion dollars to sell monthly while the importers and speculators are demanding around three billion monthly.
Yet the mess go even beyond not saving for a rainy day, and predates even the PDP. We gave birth to a baby and it is reluctant to grow and refuses to be weaned. With abundant foreign exchange we thought we could develop industries, mining and modern agriculture as well a viable private sector. The CBN was busy exchanging peoples naira for dollars, so that businesses could import machinery, spares parts, raw material and even experts to develop our local capacity, reduce imports, export more and help us get more foreign exchange. We ended up creating pampered, obese manufacturing, agro-enterprises and services that refused to become real businesses. They come with naira, exchange it for dollars, import and sell in Naira only to come back for more dollars. The reserves we should have used to modernise infrastructure, develop science and technology, conduct R&D were all wasted on private jets, luxury mansion abroad, champagne and the like. And because most of the money is illegal they hide their wealth and refuse to pay tax. They are busy struggling to be given more monopolies and multi-billion dollar opaque contracts.
Not surprisingly they were thrown out, kicking and screaming. But have we learnt anything from the experience? It doesn’t look that way. For it seems they are back, trying to convince the gullible that theirs was the best of all possible worlds, with cheap rice, cheap Dubai tickets and all the imports from China. We must remove all cobwebs from our minds. There will never be enough foreign exchange (from anything we now know) that will give us all the imported goodies we want without creating and cultivating things the outside world is willing to pay for in a convertible currency. We must produce more, import less and flood the world’s markets with our goods and services. Then we can import from others. This Buhari and his people at least understand.
Their problem seems too much fixation on monetary policy, and a CBN which is too passive where it matters; capital control. The massive demand for dollars is partly speculative. If it were to pump $5 billion a month at the rate it is going, the “importers” and the banks would mop that up. Does it have even an inkling of what our essential imports are? How much do we really need for new machines, replacement parts, spares, raw materials and so on? Where are the export proceeds of the few industries that are engage in external trade? When will they start using some of their dollars to finance their own imports and reduce the pressure on our limited supplies? More to the point, when will these firms that have sourced most of their dollars feel big enough to go to the international capital and money markets to get their forex? Should the super wealthy with good credit standing internationally like the Dangotes, the Adenugas, the big oil concerns or the GSM pirates hoard all their dollars waiting for the CBN? Surely their businesses are now viable enough to service whatever they borrow abroad. All businesses cannot continue to be treated like infants forever. When can they feel big enough to try surviving in the wild?
If we aspire to greatness we must think, plan and act big. Except for critical national projects like chemicals, iron and steel, machine tools, and security industries we must set a target for ending CBN provision of foreign exchange in the next five to ten years. Micro, small and medium enterprises could be exempted, but we should target full convertibility by producing enough of what the outside world needs from us. This way they can receive naira knowing there are things they would want to buy with it from us. We can then keep surplus forex in reserves.
Otherwise, all the plans to sell our national assets sound like a dead end; mortgaging our future for trinkets. Worse still, when another government gets into similar crisis, or even worse, what will it sell? So you get more money to give to the governors, to sundry importers and big contractors? What does the nation get? Token taxes? And we shall tell the next generation that some politicians and experts advise us to sell every asset?
The general policy thrust is mostly good, but for some ideological blinkers. The execution is “fair” to “wobbly”. Still, the knowledge (and political) base is too narrow. Development is a social and political matter as well and not just financial mumbo-jumbo, and the Government would do well to think beyond Abuja and Lagos “experts”, if these are the only sort of suggestions they think of. Recession is temporary, business adjustments will take place once your plans are made clear, but don’t rush us into areas we may not easily get out of. And stop pampering traders and speculators; let them learn to source for their non-essential imports by themselves, and payback the nation through reinvesting from their chests.
On a very serious note, stop telling me about Thai rice. Where is the maize, guinea corn, millet, yam, potato, achcha, cassava, wheat, local rice and other grains and tubers we grew up on? Expired parboiled rice is actually not healthy.