By Charles Onunaiju
The frenzy of excitement among key government figures, including president Tinubu at the momentary gains of the national currency, Naira against the US dollars is a cause for concern because such pyhrric ecstacy can blur the line on what need to be done on a sustainable basis. Money is a medium of exchange or a mere receipt for values and also means for exchange of values. The measuring of the value of Naira against the U.S dollar or any other major international currency for that matter is wrong headed economics with consequences for inaction on crucial structural issues that have real possibilities to reset the economy and put it on a path of sustainable growth and general well-being of the population.
Money must first be seen in the national context as a reflection of the values created for which it,s a mere receipt and potentially incline to value additions, stagnation or even decline. It has prospects as a tool to assess further value addition and multiplication and can also help to understand the trajectories of the stagnation and inertia of values creation, with all this depending on the elaborate policy options available from the realistic examination of the actual situation.
The dollar is basically, US national currency despite its international standing and the US authorities tinker with it variously to manage their economy and they do not need any consultation outside their shores to do this. A key indicator in the trajectories of the currency is interest rates, which is mostly applied to manage inflationary trends. In 2022, the US Federal Reserve or Central bank hiked interest rate by cumulative 3% with the aim of taming inflationary pressures, while these measures are designed to recalibrate the US economy, the implication for other currencies tied to Dollar like the Naira would be sharp rise in the value of US national currency and a negative impact on the local currency.
Two ways to ameliorate the situation with both and long term implications are obvious. In the case at hand, Nigeria government has chosen the easy way with the least exertion and without any prospects for sustainability in the long run but has brought only a short term relief that has spurred the avalanche of political chest-thumping most likely to dissipate when reality sets in. There is no serious original policy intervention that has currently featured in the momentary arrest of the drift of the local currency except for travelling the familiar and old path that have only delivered temporary relief. A 3-billion-dollar loan facility guaranteed by oil sale as collateral was sourced and is been massively deployed to stem the hemorrhage of the Naira, which is most likely to stabilize the local currency against the US dollar only in the short term.
External factor like the potential adjustment of US interest rates which are widely speculated to be imminent and certainly outside the influence or control of the Nigeria’s monetary authorities could tip the Naira for another round of downward spiral. Combination of the measures which the government has embarked, including sanitizing the manipulative parallel market and placing a lid on government excessive demand for foreign exchange by placing a short moratorium on foreign trips especially the frivolous ones, for which the Nigerian officialdom is quite notorious may have played role in the naira recovery but just for the short term.
These measures could ameliorate the fate of the Naira in the short term but will do nothing to strengthen the value of the currency and stabilizer it in the long term, which can only be attained solely and exclusively on original policy ideas and initiatives focused on value creation, multiplication and expansion. And this simply means a deliberate return to the path of value creation with focus on optimizing agricultural and industrial productivity. This is the road that is hard to travel but it is certainly the only way. And to break from the old tradition, the easy and comfortable way, conducive to politics of fiscal profligacy will be difficult and that inform my modest expectation, that President Bola Tinubu who for years has been steeped in the politics of shuffling the existing values without creating new ones, in the quest for the top political job would choose a political suicide of the old ways and be reborn as a new political creature focused on wealth and value creation instead of merely shuffling the existing ones.
So far, he is trapped in the mud of the old way and his recent exuberance about the momentary recovery of the Naira showed how determined he skit around actual economic reality with the balm of political rhetoric. For the rest of this short article, we will deal with the road, not taken, despite that it offers the most meaningful path to not only recovery on a sustainable basis but guarantees the well-being of Nigerians. Despite the fitful recovery of the Naira, prices remain at the rooftops providing absolutely no respite to the long-suffering citizens and the reasons are not far-fetched. The current gains of the naira is not the result of any value addition to the existing one but merely rechanneling the disproportionate volume of the existing value to boost the naira beyond its real worth. Massive expansion of productivity and revenues accruing from both the domestic market and earning of from exports, especially from non oil sector would stand the naira in a better stead of genuine recovery with the consequences of moderate price stability .
To start, we proceed from the fact that money of any type including the Naira is not value or wealth in itself but rather a receipt of the wealth or value that is created or to be created. Therefore, anyone seeking to understand the value of currency without focusing on the values of material products created and how these values are added, multiplied and expanded, would be acting as the foolish dog that chases its own shadow to the sea where it summarily drowned.
Beyond the shenanigans of currency manipulators, which can be considerably contained by a range of administrative policy options which would not only contain such speculative actively but can proactively, constrain the existence of the condition that give rise to such activity in the first place. Nigeria sits on a massively untapped wealth, including a demographic advantage of resourceful and creative youthful population.
And across the country, in the various regions and climatic conditions, Nigeria has huge material endowments that beckons for optimal exploration, but the curse of myopic leadership mainly focused on the next election and policy inertia, compounded by a deficit of originality have added to the woes of a country, naturally, wired to play in the big league of at least the middle-income countries. Rural revitalization through a coherent and sustained national policy of boosting rural connectivity, would raise local production, spurs a national wide rural and primary market that would establish the unbreakable framework for a national value chain.
These rural markets existed in the 1970’s feeding the then, incipient industrial networks in the urban centers, thereby giving shape to national integrated economy where horizontal sectoral linkages were forming the condition for resilient and self-reliant economy. The performance of non-oil sector which was the critical driver of the Nigerian economy then, and the material values that were consistently delivered by the robust interaction of these virtuous endogenous factors created and bestowed value not only to the national currency but majority of Nigerians could feel it in the quality of their food, education, medical care and even leisure. Mostly Western embassies in Nigeria then including the US, the UK, France, Italy and others vigorously campaign for Nigerians including students to take holiday tours of their respective countries and the Naira was to the Americans and British then, what the dollars, euros and pound sterlings are to Nigeria,s elite today.
To revive the national economy and deliver the value that would stabilize Naira in the long term, requires more than the current measures that seemed more tailored for the purpose of political ventilation than to address the root of the matter.
The root of the matter is the structural disarticulation of the Nigerian economy, in which non-economic variables play leading roles both in the distortion and deformation of the economy. In the current economic impasse of Nigeria, the industrial sector, small and medium scale businesses have been considerably asphyxiated making way for the rise of speculative gang, which are paradoxically revered as the “captains of the private sectors”. In cahoots with politicians, this tiny sect of state-minted billionaires have disproportionately cornered the existing wealth without actually creating any new wealth and thereby depriving the real sector of the economy, the financial oxygen they need, not only to breathe but to breathe life into the Nigeria economy.
Increasingly, the nexus of these cliques with politicians in government expands and dangerously foreclosing the prospect of rational allocation of resources to the sectors more conducive to value creation, addition and expansion. There are differences between undue appropriation of the existing value to grow fat among the few, and genuine entrepreneurial endeavors, where the expansion in the wealth of the leading captains triggers rising incomes among the rest of the populations, with opportunities spreading across the board in a win-win situation for all stake holders though affecting all, differently according to outputs and contributions.
Nigeria’s years of economic gloom and its dire socio-political consequences can be overcome but there must be genuine appetite to see the big picture, instead of the short term goals of political goal scoring. The President Tinubu’s government has set itself in a mood of ecstasy for no obvious reason except to validate its political line. The key economic drivers that would return Nigeria to her manifest destiny of a growing, middle-income country are there, but either have been condemned to obscurity or even lay undiscovered and unsearched for, because of the “politics of the belly’ as one French iconic political scientist puts it. However, while the existing order is not sustainable as the majority of citizens wallow in the brutality of misery with the additional toxin of insecurity, sensible leaders will act fast to prevent a festering and widening social chaos from mutating to political rupture.
• Onunaiju, Commentator and Research Director of an Abuja – Based Think Tank