By Dr Carl Seiyaibo

Nigeria’s current experience is due to a harvest of accumulated abandoned and dysfunctional operational system as a result of inconsistent and failed policy outcomes and the neglect of fundamental national issues.

The politicization of the operations of the economy and its growth determinants and as well as lack of long-term economic and infrastructural developmental plan laid the architectural structure for today’s economic mess.

There is no reasonable number of factories and infrastructure functioning optimally that the nation can brag of or that can act as a buffer in the eventuality of system disorder. Can all the tiers of Nigerian government operate in a month without a recourse or dependence on crude oil revenue to finance their expenditures? Knowing very well that all nations operate and function based on a well-planned and properly structured system, but the reverse is the case in Nigeria where party agenda and individual interest take preeminence.

It has been observed that Nigerian government believes in ‘fire brigade’ approach to issues without paying cognizance and proper attention to due process, system development and production. That is why the country’s production sector suffers, as the country depends on imported products that can be manufactured locally. Nigeria is one of the countries that abandoned its production system for importation alternatives, thereby destroying the fundamentals of its economy.

in a nutshell, the nation’s exchange rate problem is artificial as the regulatory bodies and their associates trade in dollar for personal economic and political interest.

One may ask, if CBN can provide information on the total amount of dollars and its equivalents in circulation and the quantity in individuals’ hands that has been hoarded?

Nevertheless, historically, the Bible or the Quran has become a key reference point in every individual’s life.  Everyone’s or a nation’s experience is traceable to either of them. Nigeria has found itself in a moral dilemma and groans under dimensional miasma of confusion. One area the Nigerian government needs to look into critically is the Book of Isaiah chapter one, verse twenty-two to twenty-three, where the Bible says, “your silver has turned lead, your wine is diluted with water and your rulers are rebels and companions of thieves and everyone love bribes and chases gifts.” This refers to the currency of Egypt which turned to lead. It means that the silver is worthless and has been devalued. The natural resources are of no value and corruption is ruling the country and has become a household name. Do the referenced Biblical verses mean anything to Nigeria?

Nigerians must have observed in countless number of times that especially during election period, aspirants and candidates would seek the face of the Lord for spiritual directions. Some of them would even assemble prayer groups (warriors) to ensure that the anticipated and distinct objectives and thoughts are realized. However, in the administration of the nation’s economy, God’s direction is neglected and the spiritual radar of reflection is not sought after, rather conventional or experts’ judgement is always pursued. It is also my unassuming proposition that Presidency should employ the dynamics of spiritual quotients and measures by engaging men of God and seek the face of God for revelations and divine instructions in resolving the Naira exchange rate brouhaha.  It is my sincere belief that in every single problem, multiple solutions and options abound to resolve the problem. And the current national burden is not an exemption.

The weak value and the poor purchasing power of the nation’s currency requires a Declaration of State of Emergency by the Tinubu-led Federal Government. Though, he inherited the horrible economic performance, but he allowed the cancerous fluid to mooned uncontrollably by his economic models till date. It is noteworthy to state that the Naira is one of the most valued assets in the country. It is the nation’s symbol of power and authority. However, currently, the Naira is officially benchmarked at the rate of N891.04 to a dollar, but at the Parallel Market, it is exchanged at N1,530 to a US Dollar. It has continuously experienced free fall and nose-dived abysmally into the economic ocean of no return, indicating that the CBN, the Ministry of Finance and others regulatory agencies saddled with the responsibility of the management of fiscal and monetary policies could not make positive impact. Though, it is acknowledged that the nation’s currency value is determined by the variables of supply and demand, improper management of interest rate, inflation indices and exchange rate impacts on the currency negatively.

The image and national identity of every citizen and a nation is represented by the value of her currency and the strength of the economy. That is why a responsible government would ensure that its currency is unreservedly protected and deliberate measures are continuously developed with the ultimate intention that the purchasing power of the currency is of high value and not negatively impacted by the vagaries of economic variables. Moreso, the economic fundamentals of the country should have a deep attention of the nation’s economic management team to properly consider adequate measures in bridging deviations and building on dynamics of economic growth.

But since 1986, the country’s currency relationship with the US dollar and other foreign currencies has been volatile and the naira management has been politicized. Though, the Central Bank of Nigeria has deployed control, floating, crawling and managed float exchange rate models alongside intermittent interventions to achieve extended market stability. On January 31, 2024 the CBN directed all Money Deposit Banks to harmonize the reporting requirements on foreign currency exposures of banks and as well as removed the allowable limit of exchange rate quoted by the international money transfer operation with the objective of liberalizing the naira.

The Nigerian Naira, up to the year 1985, was equivalent of the pound sterling and stronger than the Dollar. Though the Babangida’s Second-tier Foreign Exchange Market (SFEM) reform policy sponsored by the World Bank and the introduction of the bureau de change was the beginning of the Naira mess. Prior to the reforms, in the 1970s to early 1980, the naira exchanged for 90 kobo to $1. Immediately after the introduction of the reforms and IBB left office, the naira exchanged for N17 to a $1. Currently the Naira is ranked 43rd in Africa. According to the World Bank, the Naira lost 40% of its value against the US Dollar between 31st December, 2022 and 15th September 2023 as a result of the Central Bank of Nigeria’s policy that resulted in the removal of trading restriction on the official market. However, during Sani Abacha’ regime, the official exchange rate of the naira remained fixed at 22 naira to a US dollar for his entire five-year term and this trend extended to Abdulsalami Abubakar’s regime with official exchange rate of the naira to the dollar for N22 to a US Dollar. During Olusegun Obasanjo’ administration, especially in 2017 the Naira was exchange to a dollar at an average exchange rate of N333.71. But at the Black market, it was exchanged at N495 to a dollar, which experienced a significant sway. In Dec, 2010, the Naira was exchanged to a dollar at average rate of N122.26 during Musa Yardua’a Administration, but at the black market a dollar was exchanged for N134. During the Goodluck Jonathan’s administration, particularly in 30th May, 2015, the average exchange rate of the Naira to a dollar was N197.88, however at the black market it was reported to have exchanged at N265 to a Dollar.  In the year 2022, the average exchange rate of the dollar to a naira was N423.72, at the black market it was N736.00. Today, a dollar is exchanged at the black market for N1,550.00 but officially exchanged for N894.52.

The abysmal failure of the nation’s currency is attributed to multifarious factors. The excessive demand for the US Dollar with a supply constraint that has resulted to long-lasting dollar scarcity in the official market and the backlog of unsettled accumulated forex with estimated $7 billion demand on the official market. The depletion of the country’s foreign reserves which was at $32.89 billion with liquid portion of $32.89 billion and blocked component of $727.67million in 31st December 2023 also could not withstand the current pressure. Moreso, the decline of investment and lower exports of crude oil and other products as well the decline of manufacturing sector speaks a greater volume on the Naira strength and survival.

In addition, a negatively swayed balance of payment structure driven by imports determinants and high debt profile have also resulted to high debt-service coverage ratio of 73.5%. According to the DMO, the figure remained unsustainable and a threat to the nation economy functionality. The nation’s debt to GDP is estimated at 39%. Though, Japan has a national debt that is above its GDP by 255%, but a highly developed/advanced social market economy and ranked as the fourth largest economy in the world. Japan has a highly export performing industrial output with greater investment opportunities on Foreign Portfolio Investment (FPI) and Foreign Direct Investment (FDI). Nevertheless, comparing Nigeria’s economic status to Japan with the highest debt profile is an unwise decision, but a substance to reckon with as the investment pattern of the borrowed funds are judiciously utilized, not like ours that always results to mismanagement.

It is apparently known that multifarious reasons are in existence in defining a nation’s currency and its exchange rate stability. A country that is import -dependent and accepts domestic and international interventions would have its currency directly and indirectly traded with the invisible hands of eco-political infectious variables.

Nigeria had its first external borrowing in 1923-1924 with a financial arrangement approximately  5.7million-pound sterling on a structured repayment period of over 20 years. However, her borrowings from external sources, that is multilateral, Paris Club, London Club came to the public glare in 1969 with $175.8 million liability. But, throughout the military regime of Yakubu Gowon, no single external debt was reportedly secured. As at December 2004 the Nigerian external debt stood at $44.60 Billion, but in 2005, the external debt stock was drastically reduced to $29.10 Billion when the Obasanjo Administration in October, 2005 secured a debt relief and cancellation from the Paris Club. A total of $18 billion relief was granted. Obasanjo consciously reduced the external debt stock to $15.49 Billion in 2007. Though, significant growths were experienced as soon as  Obasanjo left office. As at 2010, the external debt profile rose to $18.82 Billion and $32.41 billion respectively in 2015. As at June 2023 the nation’ external debt reached $43.2 billion with relational daily increase on the nation’s domestic debt stocks.

We also acknowledged that government in recent times has been undertaking some measures to revamp the Ajaokuta Steel Mill that is expected to generate $1.6B annually and to generate 500,000 employment opportunities and as well designating the zone as free trade zone for investment opportunities. The Port-Harcourt Refinery, reported to be at the verge of commencing production, will also give economic credence to the government’s economic revival drive. And other efforts the current administration is making may reposition the nation economically.

The scarcity of the dollar in the country as a result of supply deficit with its attendant effects of increase in cost of living and uncontrollable inflation is creating an unabated tension in the country. If the situation is not properly looked into, it may result to anarchy in the country. Another dilemma the exchange rate differentials will cause is the imminent closure of factories and businesses with implications of loss of jobs and tax revenues to the government. This will further increase the nation’s unemployment statistics and decline in government’s aggregate revenue that will continue to create funding gap that will ultimately result in deficit budget and consequential borrowings.

The exchange rate row between the Naira and the Dollar will further cause sporadic increase in the cost of road constructions and other construction activities in the country.  The increase in cost will have a borderless effect and also make worthless government”s annual budgetary estimates or appropriations a mirage as comparative budgeted costs for construction have tripled in reality. Moreso, the economic dis-orderliness caused by the exchange rate impasse has increased the nation’s cost of living that may possibly result to criminality and crime in the society at large.

Moreso, the uncontrolled rate of inflation and high interest rate on borrowings will further compound the problems of the country and may possibly jeopardize the economic-political knots holding the country. At both the international and the national levels, the current economic disposition of the nation will attract poor corporate rating results by rating agencies globally as the nation’ economy is gradually contracting and the dollar and in its equivalents are acting as more favourable instruments of store for value.

The country has made her neighbouring countries a haven for investment because of mismanagement and corruption. Both local and multinational firms have closed their operations in Nigeria and the statistics of discontinuation in operations remains high Today the entire country is in confusion as prices of goods and services are rising.  Invoices, trade credits and credit covenants have been ignored. The nation is in a deep state of muddle. Every day is opened to a news of a production factories or service providers closure and exit. And one day we may probably wake up to hear the news that FAAC can not hold because no revenue is available to share.

However, the nation’ currency crisis can be managed through short, long and all-term measures. The short-term measures can temporarily address the panic the crisis has caused and bring in confidence in the operation of the nation’s economy.

The Central Bank of Nigeria is urged to apply a cashless policy on the US dollar and other hard currencies in the country. This will enable the dollar to be in proper circulation and will possibly evade hoarding, hence the US dollar supply should be done and exchanged electronically nationwide. The usage of the dollar in domestic transactions by businesses and individuals should also be discouraged. The government should review and re-examine the floating policy of the Naira as the Naira requires to be defended and properly regulated. Allowing the Naira to be floated without interventionist measures will further endanger and aggravate the failing value of the nation’s currency.

Government should revisit and review the nation’s currency repatriation policy, especially the certificate of capital importation authorization and its subsequent issuance.  Government should create a ceiling of profit to be repatriated and the onward reinvestment of the residually capped profit in the country. The government can also initiate salary policy of her oversea staff in Nigerian companies’ employment. The policy shall provide a condition for only the payment of allowances in their host country’s currency, while the salaries are paid in the country’s denominated currency in Nigeria. This measure will attract payee taxes to the country as well as inflow of foreign currency to the country.

The country should also employ some stringent measures and regulations to curtail capital flight through the temporary suspension of foreign trainings and frivolous oversea trips. Government may temporarily allow studies to be undertaken in foreign universities on few specialty areas, that is medicine, software engineering, aeronautical engineering, etc. All management, social science, humanity and art courses should be temporarily suspended. This does not mean that they are not important, but the nation needs more of the others that are of specialty areas. Moreso, government should also ban some trips embarked upon by government officials and private individuals in-order to cure the nation’s currency predicament. Seminars and other related programmes should be done locally and where the need arises, the resource persons should be invited to the country to conduct the training.

Government should review the operations and guidelines of the bureau de change (BDC) and the Black Market (BM). Bureau de change and black market are parts of the nation’s current currency exchange rate problems. Especially, the black market where the dollar and other hard currencies are sold freely without restrictions. It is a market of currency for all. Many people buy high quantity of the Dollar and stashed it at home thereby creating artificial scarcity of the currency in circulation as against the expected free circulation of the currency. The Central Bank needs to review the operations of the BDC whereby the end buyer of the dollar or others are identified and what they are using the forex for. The CBN should come up with and deploy a customized software application for the sale of dollar and other currencies. All the operators of the black market should be identified and be brought to the financial system. A tablet or customized point of sale should be deployed for the selling and buying of foreign currencies. The main objective is to dissuade the physical cash sale and buying of dollar rather sales are done electronically nationwide. The deployed application should be able to extract information on the identity of the buyer and seller, the purpose of the buying and source of fund for sale, BVN of the buyer and seller, contact details and other relevant information. A dealer further request for additional fund must be supported by automatic summarized report for approval or otherwise.

Though, the long-term measures are countless. The country needs to invest in technology in a drive for self-sufficiency and transfer of technical knowledge. The country is also required to improve and work on her export opportunities. This is one of the bedrock and determinants of a nation’s positive balance of payment drivers. The government must of necessity, institute revolutionary policy frameworks to revamp the dying refineries and refurbish obsolete ones basically to refine crude oil that meets the domestic consumption and as well build additional ones of low economy cost.

Government must not forget to note that functionality of the economy and all other sectors substantially depends on the nation’s electricity power supply system. It is known that government has invested several billions of naira in the sector, especially during the Obasanjo regime.

The restructuring of the power sector has created a lot of investment opportunities and the dividends are visible. The need to protect electricity infrastructure is also critical. The government further needs to deepen its investment to raise the nation’s power supply to an enviable level. More investments are required to diversify the power supply sources to Wind power, solar energy, hydro-power, etc based on geographical suitability.

The government will also be better off if investments are made on the health and education sectors of the country. These are major sources that contribute to the nation’s depletion of her foreign reserves and also put pressure on the naira. Apart from the effect that it has caused, the implication of paying less attention to it is the generation of unemployable graduates and increase in possible death rate and unsecured health-risk related society.

The country needs to consciously invest in sectors that cause heavy outflow of foreign currency consumption and also needs to finance and develop road infrastructure and its network. One of the most important aspect of all the investment is security. No amount of money genuinely spent on it is a waste.  Though, investment in this sector has been marred with corruption. That is why the military and other security agencies are not making any reasonable headway in the nation’s security expedition. The aftermath of insecurity drives away investment, loss of lives, legal liability, tainted business reputation, increase in crime rate, etc. Another important area the government needs to regulate is the consumption pattern of Nigerians. A deliberate action should be employed to moderate the nation’s consumption structure in-order to avoid the high dependency of imported goods which may turn the country to a dumping ground for all forms of goods.

The all-time measure is the management of corruption. Corruption has successfully ruled the nation and has defied all measures in curtailing it. Nigeria is ranked 25 out of 100 points in 2023 corruption perception index. The nation is bathing in corruption and requires some form of drastic measures to recreate the system. Though the fight against corruption in Nigeria may remain one of the most herculean tasks to overcome as the menace is deep rooted.

 Moreso, the government also needs to engage experts that are devoted to the growth of the country both locally and internationally. Nigerians have the intellectual capabilities to restore the economy to its pride of place, hence the expertise knowledge of Nigerians are of high importance now and requires the managers of the economy to invite them. One more contribution we need in urgency is spiritual intervention and directive from God through our clergymen. The outcome of their interface with the Almighty God will give us a clear direction and acts as an added advantage in the search for a solution.

The government also needs to review the public service rule to vacate or abolish the provisions limiting civil servants to peasant farming. As millions of civil servants who contributes to the development of the nation are relegated to household farming alone kills the nation progress as they are constrained in deploying their expertise knowledge at different fields of endeavours. They need to be unlocked and to be able to steer the entrepreneur vehicles of operation.

 Seiyeibo, a chartered accountant, wrote from Yenagoa.

This piece was edited by Adesina Wahab