Naira rebirth tips for Sanusi
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My earlier piece on naira devaluation asked Chief Sanusi not to buy into this no magic by the CBN and government to make the naira strong stuff. One sees in him the quality of that old wise man of the United States Federal Reserve Bank Alan Greenspan— judging by his initial actions as the CBN governor. It is in this regard that I wish to remind him that President Clinton gave the credit of the stupendous growth in the US economy in his two-term tenure to Alan Greenspan. Chief Sanusi has what it takes to reshape the Nigerian economy and so needs to redesign his ambition as a CBN governor ought to in a civilised society.
Every economy has its peculiarities and in the case of Nigeria the exchange rate tops all the singular factor that determines the quality of life and well being of the people. Change that takes place in the rates have instantaneous effect on incomes and prices. Interest rates, inflation and the M1 and M2 money supply levels the CBN presently tinkers with work better in sound developed economies where exchange rates are less important. Like Germany found itself immediately after the world wars the value of the naira should occupy the mind of Sanusi more than anything else as the Germans would not tolerate a governor who will not give strength to their Dmark.
Except in a backwater banana republic, a national currency must have three basic characteristics. It must measure value. It must store value and act as a means of exchange. When a currency devalues regularly, the first two characteristics of measure of value and store of value are lost and only that of the means of exchange remains. Thus, my hard won savings of one million naira when yesterday’s exchange rate was 80 to 1 is eroded by 50 per cent today the exchange rate is 120-1 dollar. All other savers like me automatically have their assets and standard of living downgraded by 50 per cent. This exactly is the mechanism that makes Nigerians the poorest human species in the world today. It is not because Nigerians’ hard work rates have deteriorated so badly.
Russia, Brazil and Argentina are some of the big countries like Nigeria that have suffered the same predicament we face today. All the tinkering with interest rates and money supply as we are doing now did nothing to dent the scourge of their currencies devaluations with the attendant imported inflations. The world’s financial witch doctors, the IMF and World Bank, provided all their best consultancy advice to these countries to improve their situations but all to no avail. At the end of the day it took the maverick streak of certain individuals to break the deadlock with the reputable doctors looking stupid. That is why I tell Chief Sanusi that there is human problem that any enlightened common sense can not solve.
An insight into how the various countries sorted out their foreign exchange mess is interesting and instructive. The Russian rouble which was 1 to 1 dollar before the fall of communism reached the 6,000 to dollar rates under the guide of their banks as we have in Nigeria today with the same explanation and alibi Chief Sanusi is presently giving. President Yeltsin got up one day and knocked off three zeros from the rates to become 6 to 1 dollar. Brazil’s devaluation problem was the hourly rate type, which makes the prices of goods to change by every hour. What you buy for 100 naira at 9am goes up to 110 by 10am. Finance Minister Cardoso said enough was enough. He introduced the Real that was 1 to 1 dollar. That singular act of ending the rot earned him the presidency in the next election. The Argentines pegged their currency to the dollar to castrate stupid politicians’ capacity to print bogus money. Today, attention to other productive issues affecting the economy have taken up the place of currency devaluation worries in these countries.
Countries like China and India had a proactive approach to forex management. By this I mean they did not wait to be taught the lessons of devaluation. They prioritised what you can bring into their country with their forex. It is not possible to bring into these countries the rubbish our businessmen import to degrade our environment and destroy the home job opportunities. They do this mindful of the fact that the most important asset any modern nation possesses is its external earnings and reserves. The uses of this important asset must, therefore, add value to the productive capacity of the citizen.
All businessmen in Nigeria today are importers not because they want to be so but just because the organs of government that ought to impose restriction and open up homegrown avenues for making money do not care. Dangote can source and increase all the rice he presently imports from local farmers in his Kano State alone like his counterparts in Thailand he buys from. But if this government is not as wise as that of Thailand he is not to blame for continuing to import rice from Thailand rather than grow them locally.
The currency devaluation situation arises from our common irresponsibility of not taking the desirable appropriate action. The CBN, the government, the banks, businessmen and the urban dwellers must share the blame. But the responsibility for fixing the solution does not lie on all players. Patriots raised from the CBN and the government as it happened in Russia and Brazil would do it and raising such a body of men with smart ideas is what should occupy the minds of President Obasanjo, Asiodu and Sanusi.
That will be the magic said not to be there.