Devaluation: My layman position – Part 1
On the matter of devaluing the Naira, I do not see any objectivity in the theories being canvassed. I am clearly on the side of the Government keeping the Naira at its present value and if possible, find means of making it gain more value against the foreign currencies. I will start by commenting on some of the reasons given by “the experts” on the need to devalue the currency:
• An erudite economist asserted that we do not have sufficient Foreign Reserves to back up the value of the Naira. At the present state of the world financial economy particularly as it pertains to oil export dependent nations, I do not see us building up our foreign reserves until the economy recovers.
If the value of the Naira is greatly dependent on the ability to have huge foreign reserve, then the Naira will continue on the downward trend, and I wonder at what point it will stop. Maybe the experts can advise us on the ratio of foreign reserve that is required to keep the Naira at a determined value.
The value of the Naira keeps fluctuating as our foreign reserve fluctuates. Please let the experts advise us and tell us the multiplication factor. It is needful to recall that we never heard of anything called foreign reserves during the military era and we were a nation that was greatly indebted at that time. Still, the Naira had more value than it does today.
• Another expert postulated that if we devalue our currency it would bring in foreign investors into the country. I do not understand how. The main reasons why foreign investors have not come into Nigeria is simply because of our unstable economic policies and ever-changing government position on goods and services. Moreover, the issue of insecurity and corruption are major factors debarring foreign investors from coming. Government policies and restrictions keep changing depending on the mood of the person at the helm of affairs in that industry.
Every minister comes with his own ideas and policies changing what is on ground overnight without minding the commitments of individuals or companies on those matters and how it affects their investments. An item can be legit to import today and by the time you wake up tomorrow, it has been banned. Even when embargoes are lifted, the Custom boys wait for a year to receive the government circular lifting the embargo. Meanwhile a mere announcement by a newscaster on an embargo is sufficient for implementation the next day.
Until security of lives and properties, and also security of investments are guaranteed, the expert postulation of a devalued Naira attracting foreign investors is a sham. Most oil companies pulled out of on shore drilling because of the incessant kidnapping of their staff. The experts may wish to tell us when last he went to his home town or village without any form of upgraded security and he felt comfortable walking around on the streets without being scared of getting kidnapped.
Additionally, corruption also prevents investors from coming to Nigeria because there are several cases of companies intending to invest in Nigeria and the government officials were already demanding bribe and shares in the venture. How will a devalued Naira change this?
Moreover, the processes involved in getting approval for legitimate ventures and obtaining licences can be very frustrating. I know of an investor who came from the UK to invest in Nigeria and four years later, he still could not get the necessary approvals he needs to commence his business legitimately. He felt he had wasted his resources in the country.
With the present state of the Nation, which the present administration is doing everything possible to fix, investors in Nigeria are only those who come for short-term investments, carry their funds away immediately and the greater beneficiaries are themselves and not Nigerian citizens. Basic approvals they will gladly grant you in developed countries once you have successfully scaled through their security screening process is an insurmountable mountain in Nigeria, except of course, the venture belongs to a top public official or his cohorts.
All these problems cannot be solved by a devalued Naira. Until these issues are addressed, the economic theory postulated by the professor is a fallacy.
• Another reason stated by critics is that a devalued Naira will enable the Government have more cash flow to implement its policies. What a joke! We all know that the inflation rate in Nigeria is firstly artificial in most cases because value of goods and services really has no pricing index.
A house can be bought today for N20 million and sold for N150 million the next year. Yet the road to the house or estate is untarred and lacks basic infrastructure. Same value will get you a house in Beverly Hills in the United States with swimming pool and all other amenities. The value of things in Nigeria is premised on how much people have “gotten from the Government” at any point in time.
To be continued tomorrow.
Savok, a civil servant, is resident in Abuja.