Vice President Yemi Osinbajo’s call was for a market-reflective exchange rate for the Naira. It was a simple and forthright position on Day One of the two-day Mid-term Ministerial Performance Review retreat, presided over by President Muhammadu Buhari, in Abuja, early this week. In other words, he wants an exchange rate, determined by the forces of demand and supply, which will invariably boost the inflow of forex. Our country’s economy will be the biggest beneficiary.
Those benefitting from the prevailing hopeless skewed forex policy lashed on Osinbajo’s position, to start a campaign of calumny that he was canvassing for Naira’s devaluation. Even after clarifications were issued by his office, these beneficiaries of the flawed Naira rate continued their songs of blackmail.
Osinbajo’s argument is straightforward, and ordinarily, should not attract manipulations and denigrations. The market-reflective exchange rate is not the same thing as devaluation. In fact, the Naira will gain from market-reflective steps. The Vice President remarked: “We cannot get new dollars into the system, where the exchange rate is artificially low… I’m convinced that the demand management strategy currently being adopted by the CBN needs a rethink, and that is my view.”
In further clarifications the following day, the Vice President’s media aide adds: “For context, the Vice President’s point was that currently, the Naira exchange rate benefits only those who are able to obtain the dollar at N410, some of who simply turn round and sell to the parallel market at N570. It is stopping this huge arbitrage of over N160 per dollar that the Vice President was talking about. Such a massive difference discourages doing proper business, when selling the dollar can bring in 40% profit!
“This was why the Vice President called for measures that would increase the supply of foreign exchange in the market rather than simply managing demand, which opens up irresistible opportunities for arbitrage and corruption. It is a well-known fact that foreign investors and exporters have been complaining that they could not bring foreign exchange in at N410 and then have to purchase foreign exchange in the parallel market at N570 to meet their various needs on account of the unavailability of foreign exchange.
“Only a more market-reflective exchange rate would ameliorate this. With an increase in the supply of dollars, the rates will drop and the value of the Naira will improve. The real issue confronting the economy on this matter is how to improve the supply of foreign exchange, but this will not happen if we do not allow mechanisms like the Importers and Exporters (I&E) Window to work.”
One deceptive argument beneficiaries of the manipulated Naira exchange rate always put forward is that the Naira will crash further if market forces are allowed to determine its rate in the official market; that Nigerians who buy forex for school fees, medical bills, Business Travel Allowance, Personal Travel Allowance, among others, will have to pay more. All these are falsehoods. Rather, the Naira will benefit from the market-driven official forex market, because inflow will improve considerably. Many will be happy to sell forex in the official market. There will be no reason for round-tripping and speculative trading will die naturally. The Naira will thus appreciate. Pressure in the parallel market will also reduce.
Naira’s False Exchange Rate And Osinbajo’s Acumen
For those who say inflation will rise by allowing market forces to determine rates at the official market, it is balderdash. The argument is anchored on the deceptive belief that the Naira will crash further if exposed to market forces in the official market. Of course, as shown above, round-tripping and speculative trading will die with market-reflective steps. The Naira will gain from these.
I always find it nauseating when the CBN governor, Godwin Emefiele, underrate the role of the parallel market in the importation of raw materials. You often hear him saying this market “serves many corrupt and illegal activities that should never be used to determine the exchange rate of the Naira.” This is not true. Emefiele should go and engage key private sector players to understand what I am talking about.
Manufacturers and other businesses are sweating to access official forex at the I & E window. An official of the Lagos Chamber of Commerce and Industry told me: “We hardly get up to 20 per cent of our forex demand from the CBN.” The inability of the official market to meet demand is putting pressure on the parallel market.
Sadly, the Nigerian Autonomous Foreign Exchange Market (NAFEX) is not being properly managed, resulting in the pressure it is facing. Here, only government agencies supply forex. Others are discouraged from doing so, because of price-fixing by the CBN. There is unsuitable pricing, with a huge gap between the parallel market and NAFEX rates. Virtually everybody in this market wants to buy. The policy also deters export and Foreign Direct Investment.
The CBN must end exchange rate fixing at NAFEX and allow the market to determine the value of the Naira. This is exactly what Osinbajo is saying.No doubt, the current leadership of the CBN has messed up the Naira, with the manipulated rate in the official market.
The former Director-General of the Lagos Chamber of Commerce and Private Sector Advocate, Muda Yusuf, recently said the distortion in the forex market, created by the CBN, was responsible for the free fall of the Naira.
Yusuf adds: “By fixing the rate, CBN is blocking free supply to the economy because those who are willing to supply to the market will not do so when the rate is pegged. People are doing business under the table because CBN fixed a rate that is not sustainable. There is a premium of 30 per cent between the official and parallel markets. This regime is creating the problem.
“The critical factors of demand and supply, if well managed, will create an incentive for people who want to bring in forex. CBN should allow a system that works. You can never win when you are confronting the market. One of the major problems in the market is the insistence that people should sell at a fixed rate. That policy has created a problem of compliance.”
For me, the CBN has simply been squandering Nigeria’s forex with existing policy. A few weeks back, it instructed banks to publish the names and Bank Verification Numbers (BVN) of customers abusing the crooked policy. The CBN said some of the unwholesome practices included the use of fake visas and cancellation of air tickets after the purchase of PTA/BTA.
Travellers must return unused PTA/BTA within two weeks as stipulated in the customer declaration form signed by them, so says the CBN. If not utilised for the intended purpose, or if for any reason, the scheduled trip is cancelled, the PTA/BTA must be returned. So, Godwin Emefiele and his men expect Nigerians to return unutilised PTA/BTA? The CBN is being unrealistic.
Why won’t there be unwholesome practices in the purchase of PTA/BTA, when there is a huge gap between the official rate and that of the parallel market? As of yesterday, those who got PTA/BTA from the banks and decides to join the “dubious travellers club” will make a profit of N160 on every USD purchased. The CBN is evidently encouraging corruption with this policy of selling PTA/BTA at the cockeyed official rate.
Government forex must be sold at market rates. This will naturally eliminate sharp practices in the purchase of official forex, the PTA/BTA inclusive. A country struggling with forex can’t be selling the limited amount it has at dubious rates.
I concur that Emefiele’s CBN should review its strategy on forex and ensure that Naira’s value reflects market reality, rather than the “artificially low” rate deterring investors from bringing forex into the country.
Mandatory COVID-19 Vaccination: A Joke Taken Too Far
The last time I checked, COVID-19 vaccination is only capable of reducing a person’s risk of contracting the virus. It cannot totally bar the virus. In practical terms, so many fully vaccinated people still contract the virus daily. Also, the vaccination can only reduce the risk of hospitalisation and death from the virus. It’s incapable of fully preventing hospitalisation and death. Sadly, every day, fully vaccinated people die all over the world from COVID-19. The latest fully vaccinated Nigerian to contract COVID-19 and die is lawyer Ladi Williams.
The long and the short of my Epistle is that there is still no vaccine capable of fully tackling COVID-19. It is still a work in progress. All the existing ones are performing below expectations; so, why the moves to make vaccination mandatory in Nigeria? I was startled when the federal government announced last Wednesday that all its workers would be required to show proof of COVID-19 vaccination with effect from December 1, 2021. Of course, they also said, alternatively, public servants will have to present a negative COVID-19 PCR test result done within 72 hours, to gain access to their offices. The first part talking about compulsory COVID-19 vaccination as an aberration.
The Secretary to the Government of the Federation/Chairman Presidential Steering Committee on COVID-19, Boss Mustapha, who unveiled the policy at the PSC briefing, and his team, need to go back for more consultation. Has the FG done an impact analysis of making COVID-19 vaccination mandatory? Nothing has been done in this direction. Will the government be responsible for any adverse effect on citizens? Boss did not say anything about this. Even in the United Kingdom, a COVID-19 epicentre, vaccination is mandatory for only those working in care homes.
What the Nigerian government wants to do is similar to what the Biden government is doing in the United States, where it is mandatory for federal employees, contractors that work with the government and healthcare workers at facilities that receive federal funding, to take the jab. A lot of court cases have cropped against it. Of course, millions of other American workers still have the option of proving they are not carrying the virus by submitting to weekly COVID-19 tests.
I say no to vaccine mandates for Nigerian federal workers. Regular COVID tests for workers who cite religious or health reasons for not getting vaccinated should be the focus for all governments. Those unconvinced about the usefulness of the vaccine must also be respected. Concerns about the safety of the vaccine are still very much there. We don’t even know the future implications for those that have taken the jabs. Those against being used as human guinea pigs should be left alone.
We must all rise against coercion in the drive to get more people to take the suspicious COVID-19 vaccine. I expect our human rights lawyers to drag the federal government to court immediately. If we don’t move very fast against them, the option of test results might also be removed.
A few weeks back, Governor Godwin Obaseki of Edo State tried something similar to what the federal government is trying to do but was immediately resisted by the people. Obaseki ordered that unvaccinated persons be prevented from accessing government offices, mass gatherings and public places. “Anyone who has not been vaccinated will not be allowed into public places such as banks and worship centres. From the second week of September, people may not be allowed to worship in churches and mosques without showing proof of their vaccination cards at the gates,” said the governor. What nonsense! Some people went to court and got a restraining order from the Federal High Court in Port Harcourt. I expect the same for this latest COVID-19 policy of the Nigerian government.
Ring True BY Yemi Adebowale