Sanusi and the Naira
by
Chief Joe Sanusi our beloved Central Bank Governor has just given us his mind about the Naira. Nothing new he really said that we do not already know. Besides it was typically the standard explanation of the average Nigerian bank executive. What do we produce is the typical question asked any concerned Nigerian about the rate at which the Naira is sliding. But they quickly answer their own question by saying that since we produce nothing, an enhanced value of the Naira must not be expected.
Chief Sanusi is a different breed as the chief custodian of our national currency, and not the CEO of the First Bank where the constituency he accounts to was limited to the share holders of that bank. He is paid to protect our currency as a sound financial tool for our nation’s development. In this regard he owes the nation solutions to the problems he adumbrated to and not merely fix the blame and hands off with a statement like — the CBN and the government do not have any magic to stall the Naira’s fall. If he has run short of ideas which I think he has, he should tender his resignation to his boss Mr. President.
I know that he is only doing the President’s bidding as scripted by the chief economic adviser, Chief Philip Asiodu and that will make resigning on account of this not necessary. But to discerning and enlightened folks who knew what Alan Greenspan, Eddies George and their German counterparts do in their respective countries, Sanusi is soiling his honour and reputation by staying on to do Asiodu’s bidding when he knows he has superior ideas to counter the problems at his door steps.
What makes one feel strongly that Sanusi given the latitudes required can give us a 70 to a dollar exchange rate President Obasanjo promised Nigerians residents in American during his visit there as president elect is the first action he took when he took the seat of the CBN governor. He raised the cash deposit ratio and the Naira back up for FOREX purchase to more than twice the value of each dollar purchased. The intention of this move is to tame the ugly situation where every kobo in the vaults of the banks were thrown into IFEM for dollar procurement. The multiple sum of Naira back up for dollar purchases therefore sterilise the quantum of Naira required for the domestic economy that is placed to chase the dollar on the external economy.
The banks cried blue heavens and used all weapons at their disposal to call and win the reversal of this new creative measures of Sanusi to the old Naira destructive scheme. Today the fundamental that determines the demand for FOREX is the amount of budgetary funds released to the various beneficiary government organs and the expansion in the monetary system the banks themselves create as loans to customers and without themselves. The increase in the price of oil, the credibility of our democratic government, the balance of payments and budget surplus which are part of the basket of fundamentals that determine exchange rates in other parts of the world are completely ignored. The windfall from increased of oil receipts in dollars distributed to states according to the revenue sharing formula even precipitated pressure demand on the FOREX market. It did not matter that most of the funds the states got to pay accrued workers emoluments which are not dollar based commodities.
President Obasanjo surely likes Naira devaluation as it is a source of slush fund available to the federal government alone to spend. I mean the Naira exchange gain which is left unaccounted for in the federation account for subsequent distribution. The treasury secretaries of the 36 states of the federation had better bring this to the attention of their governors to begin to request for identification and accounting for the monthly exchange Naira gains accruing from the daily devaluations. This hidden source of funds for the federal government to play big boy with-successive military governments have enjoyed could be what swayed Obasanjo into buying Asiodu’s continued devaluation plan and dump his promise to bring the Naira to 70-1 by the end of his four years.
Chief Sanusi must not give up as there is a flip side to any seemingly unlovable problem. All that is required is common sense of knowing what proportion of the federal allocated budgeted funds should be domesticated. The Chartered Accountant in him should tell him that funds lodged in banks for payment of staff salaries should not go into the purchase of FOREX. The N38 billion Naira Abuja stadium should not give the contractor license to transfer 70 per cent of that sum abroad for construction procurement. The sand, cement and local labour content of the project that is paid in Naira cannot be just 30 per cent.
There are a lot of holes to fill to make FOREX demand more transparent and effectively productive to the Nigerian economy. Like Governor Segun Osoba rightly said, a thorough audit of FOREX purchases and their relevance to the immediately and long term needs of our economy should be carried out in public glare. Demands for 25 million Naira basic travel allowance is ridiculous but forms a great proportion of FOREX demands. Let us take a cue of FOREX management from countries like Indian, China, Malaysia and Thailand where some fresh ideas out of our present difficulties will be richly derived. They have the magic which we too can borrow from.
That is the situation Chief Sanusi.