What if we allow the naira to officially appreciate?

The immense sophistication of the Nigerian economy – as with most other African economies – is only in our heads. The economy can be properly managed, if only we would insist on standards, and tone down the feeling of self-importance. Also, if we would not allow those whose business it is to sabotage and undermine […]

The immense sophistication of the Nigerian economy – as with most other African economies – is only in our heads. The economy can be properly managed, if only we would insist on standards, and tone down the feeling of self-importance. Also, if we would not allow those whose business it is to sabotage and undermine the economy (most of them Nigerians), to get away with it.
Many rushed to town some days back to celebrate the momentary loss in Naira value in the ‘black market’, the official market holding firm. ‘Hey!!! we said it, the Naira will soon become like paper! It will drop to N500 to the Dollar!’  These are Nigerians, whose every thought is about the collapse of their own country. Patriotism, or the lack of it, has shown up to be one of the key considerations in determining the value of the Naira; or as many would like to put it, in ‘allowing the Naira find its level’, whatever that means.
It is a matter of demand and supply no doubt, but consider these factors:
1. Many Nigerians demand Naira just to show ‘class’. They spend dollars in the thousands of weekend parties. They actually ‘spray’ dollars and people dance on the images of Benjamin Franklin, Abraham Lincoln and so on. You can’t read this in any textbook. It is largely a Nigerian phenomenon. Should we not consider this in the argument for the ‘true value of the Naira’? This demand for dollars to ‘spray’ frivolously, to show off with at your children’s school, to donate in church (because the pastor says God loves Dollars more than Naira and blesses Dollar-spenders more), or to your girlfriend and concubine, forms a major part of the ‘demand side’, and it is stupid and needs be curbed. Nigerians now seem to exist for the purpose of making the US Dollar stronger. Many of us are whining as if spending dollar is a human right!
2. Many Nigerians are arguing against the curb in foreign currency accounts within the country. Some have gone ahead to show how banks like HSBC and Barclays advertise for customers to ‘manage their accounts in any currency’. I have lived in the UK before and can say that less than 0.01% of their population, a few thousand people, care about such options. Asides from that, try sending 1,000 pounds transfer to anyone in the UK and see if you wouldn’t get a call from some operative, trying to get more information about the transaction and your relationship with the beneficiary. In the USA, under the PATRIOTS Act, any funds transfer can fall under scrutiny and you may be lucky to escape the next neighborhood terrorism raid.
The point here is to say, that Nigerians are ‘tripping’. Let us not forget the ‘sons of whom we are’. Let us look back at our society and realise early that our economy and society are still at primitive stages.
3. I always say that in all my years of banking I never saw a single international trade document denominated in Naira. Even when the Naira gained massively against gobal currencies, our exporters still demanded for Dollars. I have never seen any NXP Form (export form), wherein the exporter demands to be paid in Naira. This can only be a combination of lack of patriotism and miseducation or ignorance. The current experience has shown that the Naira can gain against other currencies if only we did the right things and were bold enough. Yet, our exporters would never collect Naira. Every Nigerian wants dollars. Schools, boutiques, sundry market stalls. At the base of this behaviour, I see a huge inferiority complex, which must be cured forthwith. With this mad importation of everything from everywhere, and the demand for dollar for every export transaction, we are not creating any demand for the Naira. So how can Naira be strong? I believe the CBN is right to hit us with a club ‘upside our heads’ so that maybe our heads will be ‘correct’!
4. SEIGNIORAGE. That is the advantage a country enjoys when it’s fiat currency is accepted and spent anywhere, within or outside its country. If a country spends $0.05 to print a $100 currency and puts the money out for use in any country, the $99.95 is its own gain. The Goodluck Jonathan days saw the US Dollars becoming the currency of Aso Villa itself. People lost interest almost entirely in the Naira. All what is going on now is the chicken coming home to roost. Dollar importation is big business in Nigeria. But we should remember that those high denominations are sent here especially. As a matter of fact, Nigeria is the highest importer of US Dollar in the world. So apparently, we wake up daily and destroy our own indigenous economy, and everyone has developed this sense of entitlement to the dollar, such that we now sound as if it is part of human rights to maintain a DOM (foreign currency) account!
In the US, the $100 is a rarity on the streets. Most shops do not collect currencies higher than $20. Yet that country sits atop the world, economically speaking. Someone I know was arrested in the UK for spending the 50 Pounds note. It was early in the morning and she was heading out to a training. She branched somewhere and bought a cup of coffee and paid with 50 ‘quid’. The attendant had never seen such money before, and called the police. They arrested her, only to release her and apologise three hours later. Nigerians are gloriously deluded. We don’t know how tough things are in other countries.
Let me end it there. I was just wondering what would happen if the CBN decided, especially at that point where the ‘black market’ went down to about N205 to the $, to revalue the currency, to say N180 to the $, quietly in the official market, saying very little, and allowing rumours fester but with no statements on its next actions. The ‘black market’ will have no choice but to reduce rates and close the gaps. The fact that the CBN didn’t do this is what gave an opportunity to speculators to fight back, and the Naira lost some grounds in the parallel/black market again. Mind you, this is also a season of high demand for forex as many families travel abroad. But all hope is not lost. Perhaps, curbing indiscipline, money laundering, lack of patriotism, sabotage, wicked greed, this government can see the Naira rallying back to N150 to the $ before it leaves.
A good part of the value of the Naira, as in any currency, is based on perception, expectation, rumours, and some fundamentals. Government intervention is present in ALL currency values. Nigeria is way gone into the wilderness of self-delusion and philistinism, as far as the love for dollar is concerned. This must be stopped. The CBN has assured that all legal transactions will be funded. Only criminals should be afraid. Legal businesses will even benefit greatly, if the Naira appreciate in the official market. Yes, we can do it!