As part of our contribution to the socio-economic growth of Nigeria, we have analysed the various monetary and foreign exchange policies of the Central Bank of Nigeria (CBN) which has been implemented over the last 20 months. For the avoidance of doubt, these policies are hinged on the lofty ideals to spur the production and consumption of locally made products and services, reduce the importation of goods and services of that can be made in Nigeria and improve the foreign exchange reserves of the country. Tragically, the policies designed and being implemented to achieve these lofty ideals have failed. As a result, the Naira was one of the worst performing currencies in the world in 2016. We have witnessed an erosion of the value of the Naira, an increase in inflation to 20%, almost 100% increase in the price of essential products such as medication and drugs.
As Nigerians, we believe it is part of our civic duties to highlight these issues, and proffer solutions with a hope to contribute to the achievement of the above stated lofty ideals, as well as the ideal of improving the quality of life and welfare of the average Nigerian citizen. To this end, we make the following recommendations:
1. That the CBN completely reverses its command and control policies via which it seeks to forcefully regulate the value of the Naira and access to foreign exchange for the conduct of businesses that are critical to the Nigerian economy.
2. That the CBN completely reverses its policy of it’s controlled “float” of the Naira. Instead, we recommend that the CBN implements a policy where the Naira is freely floated and allowed to find its proper value.
We are aware that this would in the short run probably spike a worsening in the exchange rate. But if this is implemented in tandem with other investor friendly policies, it would spur an increase in the amount of Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) that Nigeria receives. We are fully aware that an increase in the amount of FDI and FPI will go a long way in improving the value of the Naira.
If the CBN had implemented a free float of the Naira at the time it falsely claimed to have done so, by now Nigeria and Nigerians would have been yielding the attendant benefits. However, its failure/neglect/refusal to do so has resulted in a situation where we bear all the negative effects of a devaluation of currency without reaping any benefits.
3. We recommend that the CBN scraps its list of the 41 items designated as “Not Valid for Forex”. In reality, this affects significantly more than 41 items (the Manufacturers Association of Nigeria [MAN] states that this list affects as many as 720 items most of which are critical to the manufacturing sector).
Most of the items on this list are critical to the manufacturing sector and the restriction on access to foreign exchange rabidly reduces the ability of manufacturers to produce goods.
In fact, in its end of year analysis MAN stated that as a direct consequence of the implementation of these policies as many as 50 factories had been shut and more than 12000 manufacturing sector jobs had been lost in 2016 alone. Gross Domestic Product (GDP) data for Q1-Q3 2016 shows that the sector has been very badly hit as its negative growth rate is significantly worse than most other sectors.
These results show that the policy is having a significantly negative effect on the sector and, in fact, hampers the lofty ideals of producing more local goods and services.
4. We are aware that contrary to the belief widely expressed by the CBN, Nigeria does not necessarily have an importation problem. What we have is an export problem. Nigeria’s problems are tied to the fact that crude oil is Nigeria’s largest source of foreign exchange.
To this end, if Nigeria is able to improve it’s the number and quality of products it exports, it would earn significantly more foreign exchange to ameliorate the consequences of the fall in the price of crude oil.
To this end, we recommend that the administration of President Muhammadu Buhari should focus more on the building of the capacity of Nigerian companies to produce and export goods than it currently does on reducing imports. This will improve the balance of trade, improve Nigeria’s foreign reserves and shore up the value of the Naira.
5. We recommend that the administration of President Muhammadu Buhari and the CBN focuses more on improving the agricultural value chain than it currently does on “returning to farming”.
We make this recommendation on the basis of two facts:
a. Almost 70% of food crops and fruits produced by farmers in Nigeria wastes on an annual basis. This is because we lack the require transportation infrastructure, storage infrastructure, processing infrastructure, and funding to process and transport food crops and fruits as quickly as possible to the consumer.
What Nigeria needs is not a mere returning to farms but a strengthening of the agricultural value chain that sees better capacity utilization at the farms, better transportation, the establishment of processing factories and ease of export of the processed foods and fruits.
What Nigeria needs is the strengthening of our quality control organisations to ensure that the food crops and fruits produced in Nigeria meets the standards required for export to other countries.
b. Our research indicates that countries with established food processing and export policies (and the implementation thereof) earn significantly more than countries that just produce food crops. For instance, our research shows that while Cote d’ Ivoire earned a little over $2bn from the production and export of Cocoa in the 2014, Switzerland earned more than $18bn (almost the total value of the Nigerian budget for 2015) in the same year from the production and sale of chocolates and other cocoa based products.
To our minds, a country seeking to resolve its currency crises should be focused more on capacity utilization and strengthening the agricultural value chain than it is on farming.
To this end, we recommend that the CBN designs and implements policies that improves access to funding for farmers and other stakeholders in the agricultural value chain than it currently does.
We are aware that there are a number of commendable initiatives in this regard. However, the processes of accessing funds provided for by most of these initiatives are cumbersome and tedious in a manner that discourages people from going through with them.
We also recommend that the administration of President Muhammadu Buhari commences a review of the Land Use Act and land tenure systems in Nigeria to enable farmers and other relevant stakeholders more easily secure title to lands which will then provide the basis for accessing funds for agricultural purposes.
6. We recommend that the CBN becomes more transparent in its dealings relating to the allocation of foreign exchange to Nigerians for whatever purposes. To this end, we recommend that CBN publishes its monthly “Form M” report to enable Nigerians know the people to which foreign exchange has been allocated, the rates at which the allocations were made, the purposes for which the allocations were made and the status of achievement of those purposes.
The implementation of this recommendation will go a long way towards ensuring that currency speculators who access foreign exchange from government coffers through dubious means will be exposed, and prosecuted where necessary.
7. Finally, we are dismayed that the simple process of seeking to contribute to national discourse and problem solving, which ought to be welcomed and viewed as an exercise of civic duties has caused so much rancour to the point where the Public Relations Officer (PRO) of the FCT Command of the Nigerian Police Force threatened to arrest, detain and prosecute Nigerians who participated in our peaceful procession.
We use this medium to remind the Police Force of our rights to peaceful assembly as enshrined in Section 40 of the 1999 Constitution as amended and as upheld by our various courts.
We also use this medium to express our dismay at the comments of the Director of Corporate Communications of the CBN who rather than engage with Nigerian citizens on legitimate and valid fears and concerns chose to take to the media to call us names and make baseless allegations.
We will continue to exercise the right to peaceful & lawful assembly in accordance to the law and as long as these problems persist.
We hope that in the coming years these sort of anti-democratic actions will be greatly reduced.
God bless Nigeria.
Adeyanju Deji Adeoye Adelaja