“The Punch — one of Nigeria’s leading newspapers — wrote an editorial on June 9, 2014, titled ‘Reserves and Continued Profligacy’. The editors marshaled out incontrovertible comparisons between what goes on in Nigeria and similar economies. Our mainstay, crude oil, has been selling at over $100 consistently since the slight dip in 2009 (for 5 straight years!). But rather than that being a cause for cheer, Nigeria and Nigerians, the leaders and the led, have been complaining bitterly. The nation’s savings, called Foreign Reserves, has been dwindling. Nigeria lost $11billion (23%) of that reserve in the last one year. Our currency has been under pressure of devaluation because dwindling reserves mean we may not be able to support our import-intensive appetite in the near future. Nigeria spent $26.6billion just defending the currency in 2013 alone!

The other ‘illegal’ savings that we do — the Excess Crude Account — according to the Punch, is nearly totally wiped out — from an all-time high of $23billion in 2007. Don’t go yet! Let me grab you by your arm and tell you some more of the bad news! In contrast to Nigeria, Angola, which until recently didn’t compare with Nigeria in crude oil production, now has more money saved up than Nigeria: $38billion. Let us not talk about countries like Algeria ($192billion), war-torn Libya ($120bilion), Saudi Arabia ($733billion). The newspaper went further to inform us that as against the $1.5billion Nigeria has in its Sovereign Wealth Fund, similar oil producing countries are light years ahead — like Qatar ($170billion), Kuwait ($410billion), Algeria ($77billion) and Iran ($58.6billion).”

I have quoted copiously from my recent article which tried to re-draw attention to the primacy of the economy in the upcoming elections. The Punch newspapers had given a lot of the background research to my perspective. The above figures and their contexts, are important, for us to know the state of the macroeconomy, and the critical challenges facing a central bank governor in Nigeria today. Let’s hold those figures in ‘our left hand first’, like local will say.

The new CBN Governor had shown uncommon honesty in his maiden world press conference, by acknowledging, perhaps unlike most people would do, the achievements of the Central Bank he met on ground. Reading through and between the lines, getting the spirit of that maiden speech, it was clear that Emefiele was bringing to the CBN a honest, technocratic energy, much like exists in the private sector. On the other hand, he intends to embark on a few balancing acts. He showed that he was making a departure from his role as a market operator, and had already immersed himself in his new duties as a regulator. The CBN Governor job is not meant to be a stroll in the park, so in marshaling out his vision and strategy, there were a few more ambitions that looked contradictory (balancing acts), but I will come to those in a minute.

Mr Godwin Emefiele clearly acknowledged the work his predecessor and the team he – Sanusi – left behind, had done. And the work was substantial. As an ex-MD of one Nigeria’s largest and most dynamic banks, he could tell that the CBN had done a great work with Financial Stability – resulting in minimum damage and no deposit loss in the recent financial crisis. The other achievements listed include the maintenance of low inflation rates, a remarkable degree of exchange rate stability, consistent monetary policy and the development of what has become a world-class payment system (better than many OECD countries I’ve been to). In terms of innovation, the new Governor intends to include the measurement of employment figures as part of the CBN’s monetary policy considerations (remarkable), establish a Secured Transactions/Collateral Registry, and increase the nation’s macroprudential threshold in view of the rebasing of the economy (this one has to do with our provisioning for systemic risks).

Some writers have criticized Emefiele, chiefly on the basis of the continuous incursion of the CBN in fiscal matters (like those interventions in Agric, Power, Aviation etc). Some have said he seems not intent on crashing interest rates to near zero “so that Nigerian entrepreneurs can be able to borrow easily”, an idea I do not subscribe to in the least, for I believe an economy like ours is not ripe for very low interest rates, cheap lending will always lead to systemic crisis in banks, and that the role of bank lending in entrepreneurship is overhyped in these parts (fix infrastructure first!). Still, the new CBN Governor says he intends to reduce interest rates, however gradually, while resisting any pressures to devalue the currency. This is a classic dilemma, as it is natural that if interest rate levels go down, players in the country’s bond markets will exit and many will demand for foreign currency on their ways out, bringing more pressure on the Naira. A low interest rate regime may also have serious negative impact on banks’ profitability, leading to more layoffs or even another round of financial crisis (defined as systemic crisis within a country’s banks). By and large, Mr Emefiele, like his predecessor, “knows where the bodies are buried”. This time, we expect him to tinker with the operational and credit efficiency as well as the strategy of banks and their business models, going by his first speech, as against the focus on risk management, which was the forte of Emir Sanusi…

And then Emefiele ran into trouble. In trying to achieve all these ambitions, and specifically, in trying to stop the hemorrhage of the nation’s savings and maintaining stable exchange rates, some anomalies were immediately clear to the gentleman. The nation had had a proliferation of Bureaux de Change (BDC). It seemed perhaps that everyone who went to university had a license, and many people moved around with dozens of BDC licenses in their portfolio or of recent, backpacks and gymbags. Thousands of these licenses had been issued over time, since about ten years ago. Many bankers retired into that business and the recent retrenchments in the banking sector saw many smart guys picking up these licenses. As against the view that BDCs were chiefly run by ‘Mallams’, this is not the case as most of the recent licenses are held by people from all parts of the country. In fact, the ‘Mallams’ are the lower end of the FX food chain in Nigeria, and perhaps make the lower margins. The big hitters are those who move millions of dollars per day on behalf of corrupt politicians. The running battles between the Coordinating Minister for the Economy, Dr. Mrs. Ngozi Okonjo-Iweala, and before her, Senator Nenadi Usman, comes to mind. There is undoubtedly, a direct link between the release of monthly FAAC allocations, and an upsurge in the demand for foreign currencies, through the BDCs and other avenues.

It became apparent that something had to be done about the BDCs. The unwieldy number meant that they couldn’t be adequately supervised, and their structures standardized. What to do? Let them recapitalize, Mr Emefiele thought. Let anyone who wants to run a BDC have the wherewithal. It is meant to be a corporate business, not an all-comers affair. But the reactions he has got so far, especially from the House of Representative, has been shocking. A member of the House had described the policy as ‘Racist’, among other unpalatable words, causing me to sit ramrod straight in my chair in horror! Where was the racism in this policy? Oh, perhaps he meant tribal. But no, he is being less than honest. In the first place, we should stop this idea of describing ourselves by ‘races’ in this country – such as Yoruba ‘race’, Igbo ‘race’, Hausa ‘race’ etc. We are not ‘racing’ anywhere. And to most foreigners, we all look the same. By Jove, right-thinking people in the world are trying to emphasise our global humanity and here we are, splitting each other as ‘races’, albeit for selfish, pecuniary reasons? Any wonder why our politics is enmeshed in bitterness? But I must mention that no matter what the policy is, for now, the business for the ‘Mallams’ will still exist, as those who need to change or purchase small amounts, will continue to find them as the easiest and most reliable avenue. So, that ‘Honourable’ was not speaking for the ‘Mallams’, and there is nothing racist about the CBN governor trying to do his job.

My appeal is that people should allow the CBN Governors, this one, and the ones after him, to do their jobs. We seem to be heaping much blame on our CBN Governors, for the ‘mismanagement’ of the economy, without giving them some space to do what is right. Everybody in Nigeria fights for only their pockets. No one wants to make any iota of sacrifice for the generality, and for the good of Nigeria. Nigerian Central Bank Governors, have gained ‘notoriety’ since the return of democracy, and increasingly so. Not by any fault of theirs. The Nigerian economy has become increasingly more sophisticated and integrated with the global economy; more accessible to foreigners and vice versa. Soludo was brilliant, but he came at a time of global financial markets exuberance, when we thought we had conquered bubbles and busts. That was what led to the market indiscipline under him, and the consequent clean-ups by Sanusi. Sanusi himself had to take surgical decisions as the tornado of the global financial crisis battered down on him and the economy. What is sad about the way Nigerians see these issues is that we block our ears and shut our eyes to the global picture. We just keep repeating, as if paraplegic, “this person is bad! Because the policy affects me negatively!!”

But we must change, for our own sake, or time and circumstances will change us by necessity. The current security challenges have metastasized to this level because of that same tunnel/selfish vision, and perhaps will get worse, as supposedly educated and intelligent people REFUSE to broaden their minds to possibilities, preferring instead the “off-the-shelf” approach, by thinking our problems can be solved in a jiffy, and that everything is already explained. No, nothing is explained. We are getting to the point where we all have to get grease stains on our fingers. We cannot expect the world to lay our beds for us, while we merely walk in and have a good night’s rest. George Orwell it was who said “a people are able to sleep peaceably at night, because rough men keep vigil, standing ready to do violence on their behalf”.

Talking about grease stains, the arguments against Emefiele’s attempt to further “corporatize” what the BDCs do, is made ridiculous when one looks at the hordes of Nigerians flocking to that subsector. We don’t want to get our fingers dirty at all. From a mere 98 BDCs in 2004, that figure has skyrocketed today to 4,625, with pending applications at almost 1,500. Since it’s all about selling dollars and collecting spreads, why would we need 6,000 of these companies? Who are they servicing? Some pundits claim that a number of those corporate BDCs who claim to be selling all the monies to travellers, merely concoct documents, oftentimes using fake or forged international passports, and obtaining mere travel itineraries from travel agencies to back up their sales. Some regulators I have met told me that some of the banned BDCs engage in a fraud whereby they use people’s international passports over and over again, to claim foreign exchange without the holder’s knowledge. Some of them, also send copies of their ‘client’s international passport to other friendly BDCs, to be used liberally. There was a time when the BDCs were just 1,000 and used to obtain $800,000 per month from CBN. Imagine; spending $800,000,000 monthly just financing BDCs! The whole idea was to stabilize foreign exchange by making forex easily available, but now, it has become a haven for lazy smart alecs and all this sabre rattling is mere blackmail. A nation does not live by forex alone!

The unsustainability of the $200,000 per week per BDC regime is why the CBN crashed what it now gives to about $50,000. The treasury was being fast depleted. We cannot claim to be private citizens, complaining about the hemorrhage in government, while surreptitiously aiding and abetting the looting going on. We cannot all be milking this country to death. We cannot be running a country of moneychangers. The $26.6billion spent, ‘defending’ the Naira in 2013 alone, mostly went in this direction! What exactly are we defending in the Naira that is so expensive? Are there better uses to which we can channel our foreign currency? Have BDCs turned into mere errand boys for corrupt politicians to launder money out of the country? How can Angola have more savings than us and we don’t feel shame? Everyone of us must by now be ready to lessen our expectations and live more modestly. Little margins, on sustainable businesses, I think, is the way to go. With the approach being embarked upon by Emefiele, Nigerian banks are getting ready for even more belt-tightening. The first salvo, is the abolition of penal charges for cash deposits in banks, and the splitting of charges on withdrawals, between the banks and CBN. This is to prevent perverse incentives. I say, MAKE WE ALLOW THE MAN DO HIM JOB! HE BE LIKE SAY HE WAN MAKE BETTER IMPACT FOR WE COUNTRY......by Tope Fasua

.... Space for. Sale

See them. This not thekind of article that hits NL FP. Know that by now

sparkleboy: .... Space for. Sale

‎​​

Don’t go yet! Let me grab you by your arm and tell you some more of the bad news! In contrast to Nigeria, Angola, which until recently didn’t compare with Nigeria in crude oil production, now has more money saved up than Nigeria: $38billion. Let us not talk about countries like Algeria ($192billion), war-torn Libya ($120bilion), Saudi Arabia ($733billion). The newspaper went further to inform us that as against the $1.5billion Nigeria has in its Sovereign Wealth Fund, similar oil producing countries are light years ahead — like Qatar ($170billion), Kuwait ($410billion), Algeria ($77billion) and Iran ($58.6billion).”

‎​ Is it that our leaders are not saving money for posterity?Yet they have saving accounts for their families but

Not for the country.Destroying the country on the altar of greed and self interest

Brilliant article. Good reading. I also listened to this on a radio programme this morning.

It seems certain individuals are fleeting govt. Montly allocations ti foreign lands.