Rejoinders: Can CBN save the Naira and save Nigerians?, By Henry Boyo


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Henry Boyo

Public rejoinders to newspaper columns and opinions may often provide useful feedback on how well the message is understood by the reading public. Evidently, not every critic of an article will find the time or inclination to send rejoinders which may serve as a barometer for the understanding between the reading public and the messenger.

Admittedly, some rejoinders could be totally off track or even aggressively partisan, and abusive. Nonetheless, the columnist must remain objective and truthful to recognise any merit, expressed in his critic’s intervention.

The article titled, “Can CBN save the naira and save Nigerians” was published a week ago, and that article, incidentally, elicited rejoinders from a reader of The PUNCH and another reader from Vanguard respectively. Hereafter, both rejoinders will be published, while this writer’s attempt to resolve differences between the author and readers’ positions will follow thereafter.

Nonetheless, the authors of both rejoinders are commended for sharing their concerns on this writer’s prescriptions for the recovery of the naira and Nigeria’s economy. The first rejoinder to the aforementioned article was a certain William Norris, who noted as follows:

“I’ve tried for years to understand what policy you support. I don’t know if you want devaluation, free float or a continuation of the current framework. Do you want (a) strong naira or a weak one? You’ve been persistent in spreading your articles all over but you give no enlightenment whatsoever. At the very least, make your writing less dense so that lay people like me can at least follow your reasoning. Blowing big grammar is not (an) equivalent to education for your audience. Thanks.”

This writer most certainly regrets any agony or discomfort to William Norris, in his sustained efforts to grasp the kernel of this column’s ceaseless recommendations for the vibrant renaissance of Nigeria’s economy, particularly as it relates to inflation and exchange rate management.

This column has persistently declared that further devaluation of the naira is totally unacceptable since it is irrefutable that the history of deepening mass poverty in Nigeria loyally correlates the naira trajectory from about 50Kobo=$1, in the 1970s, to the present odious level of N305-360=$1!

Secondly, since the currency free-float mechanism is internationally proved best practice in successful economies, this writer also advises that “if Nigeria wants to be strong and fly as an eagle,” we should also adopt the modus operandi of progressive eagle economies. In fact, Nigeria’s economy will continue to falter and poverty will further deepen nationwide, as already witnessed, if the CBN continues as the standard practice to auction dollar rations in a market that the same CBN readily admits to be eternally deluged with naira surplus. Predictably, excess supplies of any commodity, whether naira or tomatoes, will invariably attract cheaper prices! In fact, an inexplicably very weak naira rate clearly remains the major driver of industrial dislocation and increasing unemployment and poverty in Nigeria!

Notably, this writer has forever decried the adoption of the strategy of auctioning dollar rations in a market that is irredeemably chocked with oppressive surplus naira for determining the naira exchange rate. Invariably, any item put on auction will be sold to the highest bids; so, it is not difficult to recognise that it is treason for the CBN to auction any foreign currency against its own naira, in a market with extremely surplus naira.


Instructively, free-floating exchange rate is still the best practice strategy for rate determination in those successful economies, to which our youths and professionals flee to, to guarantee a more secure and comfortable lifestyle. Nevertheless, it would be foolhardy to float the naira in a market which “eternally” suffers the oppressive inflationary burden of perennial naira surplus! Invariably, Nigerians can forget any prospect of economic recovery, let alone growth if the naira is floated, as Nigeria’s odious crown of the world’s poverty capital will inevitably remain permanent!

Conversely, a stronger naira will increase the naira’s purchasing power and to stimulate consumer demand, which will in turn, instigate production and more job opportunities to gradually reduce the related horrendous level of insecurity. Invariably, therefore, any agenda for a weaker naira is not a viable option, as the related challenges are clearly apparent.

Once again, my apologies to William Norris for unintentionally “blowing big grammar,” which might have made it difficult for some readers to comprehend the related monetary analysis in last week’s article. In fact, I thank Norris for bringing his dilemma to my attention as we all know the futility of winking at a lady in the dark!

The second rejoinder is from the Vanguard Newspaper, where one Samuel Okezie also commented as follows:

“The writer ignores the more important point that Ghana and Nigeria have very little to sell to the world to earn foreign currency. That is the root of the problem. We don’t earn enough foreign currency and do not manufacture locally enough, thereby making the economy heavily reliant on forex for imports. Obsessing about managing the scarce forex we earn and speculating on fraud and abuse of the system do not negate the fact we have a huge import demand. The winning strategies are to aggressively support our local manufacturers; improve skills as  there are little skills; emphasise more on skills than just going to a university; encourage entrepreneurship; and, yes, imports of non-essential items should be very expensive.” – Samuel Okezie

From the foregoing, Okezie has identified the heavy reliance on “scarce” forex for our huge import demand, and also fingered the relatively modest output from local industries as the causes of a weak naira exchange rate. Okezie may be right, but it is also undeniable that Nigeria’s real sector has remained and will remain backward and less productive, so long as cost of borrowing remains uncompetitive, at well above best practice rates of two-seven per cent in successful economies everywhere! Furthermore, with double-digit annual inflation rates, the purchasing value of all incomes, invariably, becomes halved every four-five years, with an inevitable repressive impact on the very critical facilitator of consumer demand, which systemically instigates the appetite of manufacturers to produce and expand capacity with increasing job opportunities in tow, if they can also borrow at cheaper rates below seven per cent to satisfy expanding market demand!

Predictably, therefore, double-digit inflation rates and very high cost of funds will induce rising unemployment, while Nigeria’s industrial output will continue to remain uncompetitive and induce factory closures and deepen unemployment, as cheaper import substitutes replace local production.

In effect, with such an inherent disruptive framework, Nigeria’s industrial sub-sector will, forever, remain comatose. Furthermore, so long as inflation and cost of borrowing steadfastly remain above five per cent, Nigeria’s industrial output will also remain uncompetitive against the prices of import substitutes and we will never earn sufficient forex to pay for our imports. This stark reality has invariably constrained meaningful and inclusive economic growth since 1985!

Furthermore, since inflation is, notably, the main driver of high interest rates, (as it is not rational for anyone to lend below the rate of inflation), it is compelling that the starting point to Nigeria’s economic renaissance must be the object of bringing down inflation, below three per cent to promote consumer demand so that manufacturers and ALL businesses can also borrow below seven per cent to satisfy increasing demand for goods and services and create more jobs!

Evidently, however, the inflation rate will remain irrepressible so long as the perennial challenge of surplus naira in Nigeria’s money market subsists! It is also indisputable that Nigeria’s eternal naira liquidity excess which drives higher rates of inflation is, in fact, the product of the CBN’s deliberate substitution of naira allocations for monthly distributable dollar denominated revenue. Expectedly, therefore, the higher the dollar export earnings, the higher will ultimately be the level of excess naira supply and the greater will be the threat of inflation, higher cost of borrowing and weaker naira rates!            

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