An economist and ex-presidential candidate for the defunct Abundant Nigeria Renewal Party (ANRP), Dr Tope Fasua, says the fall of the naira in the forex market is artificial. In this Channels TV interview monitored by Linus Aleke, he is calling for reform that will stop currency speculators from destroying the naira
Recently the naira exchanged as high as N700 to a dollar, what happened?
Panic, speculation, and like you rightly said, the Central Bank of Nigeria (CBN) has also noticed this. I think it went as high as 716 or thereabout. I am just checking now and yesterday (Thursday) it was exchanged for N655, and mind you, by every means, the divergence between the official window and what is called the parallel or black market, should not exist. Even if it does, it should not be that much. But like I argued elsewhere, where the entire citizens of a country are taking a position against their currency- that is what you find.
What do you mean by that?
Of late, you know, people drop words here and there and they said that the rate is going to be this much. They quote a certain figure, one thousand to a dollar, and all of that. Unfortunately, citizens are speculating against their currency. They are saying that because of the reality that they see, what is wrong with that? So, why has it crashed these few days? It was artificial if you ask me.
Are you saying that the demand for forests is artificial?
No, no, you see, what is called the black market, and it is called the black market for that reason because it is an illegal market. However, it is an efficient market because if you want to change fifty dollars, you can quickly do that in your car and drive off. But does it dictate where the currency should be? Where the currency should be based on international trade, whether in terms of visible trade or invisible trade. And that is what should worry the Central Bank of Nigeria (CBN). To say we are providing enough for that segment of the market, which is important to the economy? And, of course, that is why we see funding for illegal activities like drug trading, money laundering, corruption, and what have you, in the black market. So, where we are right now, is a challenge for the Central Bank of Nigeria (CBN) to say, look, we are now in need of serious reforms, and we need to meet the demand for official and legitimate transactions, and meet them quick enough and robust enough. But we are Nigerians, we also know that people get money from AMC, they say that they want to import, and the button line is that they want to transfer the money abroad to a friend or someone and make a lot of money out of that. We have to make provision for all of that. It is what it is, we are who we are, but the Central Bank of Nigeria (CBN) cannot feed that market. Whatever it is, we can see a few reforms between the customs and the CBN, in terms of checking and verifying invoices abroad. All of those things must be tech-enabled to be able to check that and make it seamless.
We saw EFCC agents’ invasion of BDC operators in Abuja, what informed that move by the government?
We often conflict the function of the BDC with the parallel or black market. BDC and the parallel market are not supposed to be the same. BDC are set up all over the world for tourism, for tourists to be able to quickly change their money or to buy quick money and move. Now, the BDC should not be seen selling money at the black market rate, what for? That is where the EFCC comes in, and all of that. Remember I earlier said that the market is good for funding things like corruption, etc. If you wanted to pay N100bn having done a contract somewhere, you are not going to be calling naira to them. Nigeria must buckle and be like the rest of the world at some point. We are a very cash-intensive economy, despite e-banking, despite all kinds of reforms that have happened. But we have to start to do things the way other people do them. If you travel abroad these days, you see that cash is becoming outlawed, but here we still move around with cash.
Talking about reforms, we have seen CBN take some steps. They stopped supplying forex to the BDC and stopped the online platform that used to display the rates, we felt we are going to see one big change, what are we seeing?
It is still ongoing, however, the CBN is going to need political backing for the kind of reform we need to do. For instance, I said that people are taking positions and speculating against the naira. What that means is what the people are thinking that the naira officially is going for N420, and this other market is going for N650. So, the game will be how can I get dollars at the official rate and sell at the black market rate and make the difference. Again, people own domiciliary accounts, and they are saving their money in dollars. So, if people are saving their money in dollars, and investing in dollars, it then means that they are taking a position against their currency. Political backing, because we see a lot of money, the dollar around the hands of politicians. Most of them spend dollars; their wives, their children, and even their grandmothers spend dollars, and, unfortunately, they spend dollars.
Does that not tell the level of lack of confidence in the naira?
Exactly, that is what we are talking about.
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So, should we do something to restore confidence in the naira?
Exactly, but again, it is a political thing. The management of the monetary policy of a country is not just the Central Bank. We like to wake up every morning to say the CBN has done this, and Mr. Godwin has done that, and not the president. The president needs to understand that this is part of his function. If people are expressing a lack of confidence in your currency, you are the one that will let them know the meaning of currency. The currency is the representation of Nigeria, the currency is our worth as a nation in the international arena. Sometimes people will carelessly say, why don’t we devalue the Naira or float it? We don’t have the means to do that. Let me tell you what will happen if we move the official rate to say, five hundred, the parallel market will automatically move to seven hundred. You know why, because of those transactions I mentioned earlier, which cannot be met officially. For as long as those demands are coming, for as long as people are spending in dollars and moving dollars around in their cars, for as long as people are receiving the little reserve in dollars, we cannot devalue or float the Naira.
What do you think the CBN can do to quickly address these concerns?
I may not be able to speak for the CBN, but in my own opinion, I think that we have reached the epoch where we need to de-dollarize the system. There is no need for people to have a domiciliary account, having a personal domiciliary account amounts to taking a position against your currency. But, if you are a businessman involved in international trade, travel agents, etc, yes, it can be justified. But if today, the CBN says, for example, you know they have this scheme where they give N650 per dollar for people who export goods. Tomorrow, we will stop entertaining personal domiciliary accounts, we would permit only corporate accounts. However, if you have money in your domiciliary account, it is either you change it at that kind of rate plus an extra to give room for them to change the money to Naira. Look, they did it in India around 2016/17, it was called back money. They found out that people have so much money in cash under their beds and stuff like that. The order then was to bank the money or risk losing them. In this instance now, we cannot because we don’t have the means. What makes a currency of a country strong is what you import vs what you export. If you look at our import profile, you will see that our biggest import is technology, everything here is technology, our phones, our laptops, etc. It is about $25bn annually. The second thing is refined petroleum, about $20bn, followed by wheat, we bring about $2.5bn worth of wheat for bread into the country annually. Pharmaceutical is about $2bn every year, but if you look at our export side, in billions, we have only one thing as against the 12 items on the list. The only thing we export in large quantities is crude oil. We are not alarmed enough, it is not just enough for people to pass the blame. We are killing our country and since independence, all we are still doing is export crops in their row forms.
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What should we be doing?
We should be producing, the government is not going to produce. We are the ones to produce, it is a private sector thing. It is good you talked about producing because one of the ways to boost the naira is to export goods, now people want to produce and export, but there are infrastructural problems and insecurity.
Most farmers no longer go to the farm, so where do we get the raw materials to produce?
It is back to the national question, it is for the president to do what he needs to do. Hopefully, there will be a change of governance and maybe things will become better.
You know what I am saying, but the bottom line is that we have no choice but to try and produce. I want people to see this as an opportunity when we say that there are no jobs in Nigeria, and no business in Nigeria, but foreigners come here and make a lot of money. Are we all going to leave the country so that foreigners will come and inherit the country and turn it around? There is nothing wrong with this country, a lot of the security problems that we have been having are subject to compromises. Gen. Abacha said before he died that when an insurrection continues for two weeks, the government must be aware of it. Do you know what they are doing they are spending billions on security, and we are not having security all the same. However, it is still an opportunity for our people to get involved in business, we have no choice. If we say, let us play the currency game and everybody is playing the currency game, let me buy dollars, keep them, and sell when it appreciates, Naira will become rubbish. At the end of the day, what we are doing is that those who don’t have access to money to buy those dollars are getting more desperate because, by buying dollars, the Naira is falling, and inflation will set in big time in the society. That is why we are seeing the price of many things doubling and tripling. Those who have no access will come for those who have access. And we would find out that we have no society in the future.
Where do we start?
Political decisions have to be made, people have to stop this speculation. That should not be allowed. In China, if you speculate their currency, they will march you to the gallows and cut your head off. See, the politicians must understand that this is their problem. What I am proposing will come to the jugular of corruption because corruption gets paid in dollars. We have by far one hundred dollars denomination in Nigeria than what they have in the United States. Why are we the ones worshiping the dollars here?
