If the wailing of the business class has not reached the ears of the landlords of the villa, it must be due to either the impervious nature of the walls, or the pigheadedness of the dwellers of that rarefied abode of power. After months of shouting themselves hoarse about how much the stifling policies of the apex have come to hurt the real sector with no one pretending to have heard, the crunch may have finally come with the naira hitting the nadir trading at N260 to the greenback at the parallel market in the past week.
That development seems the closest sign to the troubling times that lie ahead, particularly in an in an economy which manufactures next to nothing and which exports only crude to finance its obsessively compulsive consumption habits. The exception perhaps would be Godwin Emefiele’s world of utopia where monetary policy comes close to doing nothing or where economic management is locked on autopilot!
Today, the naira is practically fixed at N197-N199 per dollar; it’s been so since Emefiele’s apex bank put the brakes on banks’ ability to buy foreign-exchange from autonomous sources, followed by its tightening of the noose on importers of some 40-odd items, ranging from toothpicks, glass to rice.
Several months on, the real sector complains of delay in the processing of Form M to import their raw materials and spares. The organised private sector, in particular cannot seem to make sense of what is going on. Businesses with outstanding settlement before the new policies commenced were particularly hardest hit with many unable to remit their due payments. Bills for collection, the facility which allows companies to ship in goods for weeks, months before paying back has dried up because of default arising from inability to transfer fund giving rise to credibility issues. In summary, very limited activities appear to be going on in the productive sector.
Meanwhile, the apex bank, like the Federal Government, insists on living in denial. And while the former swears by heaven that it has enough forex to finance all legitimate imports, virtually every sector of the economy complains of being ill-served by its current forex regime. The situation reminds me of the story of a surgeon who after a delicate operation pronounces the operation successful only that the patient had succumbed fatally to the knife! The surgeon, as you might imagine in this case is the CBN which insists that everything is fine; the patient of course is the economy currently reeling under the threat of extinction and with it the hordes of disparate players being criminalised essentially by the apex bank’s stifling monetary policies!
All of these – unfortunately – would hardly have mattered were the policies to be seen as delivering on their objectives. The reality is that this is far from being the case! One ready proof is the sinking naira – no thanks to the booming parallel market fostered by the CBN; the other is the constriction forced on the economy by lack of access to forex. The derivative is the parallel economy where no one can truly claim to be in charge.
Of course we know what the situation is at the moment. Despite the so-called restrictions put in place, our ever the smart Alec club of importers have practically made nonsense of it with their heavy patronage of the alternative but hugely expensive parallel market. Now, thanks to the piggy banks of rich Nigerians in Diaspora or the club of Nigerians with fat off-shore accounts, you can access all your forex requirements without having to go through any financial institution provided you are ready to pay premium. One financial sector operative actually told yours truly last week that these accounts – which at the moment appear inexhaustible despite its attendant risks – are available to settle all manners of foreign exchange transactions but only at rates far above that obtainable in the local parallel foreign exchange market! With daily reports of trafficking in Automatic Teller Machine (ATM) cards and with recent reports of young Nigerians swallowing foreign currencies, there appears to be no limits to the desperate measures being adopted by Nigerians to beat the CBN measures. Given the situation, would anyone still be talking about respite for the naira anytime soon?
Is that what we bargained for? Has anyone out there yet figured out how the measures will get our factories roaring back to life? Today, with barely $30 billion in reserves – just about enough to finance seven months of imports, and with oil prices hitting a new low over of $36 a barrel at the weekend, some levels of control of foreign exchange utilisation have become somewhat inevitable. But while I would go as far as to argue that a return to the ancien regime of mindless liberalisation is neither desirable nor wise, I would also make the point that the current foreign exchange regime cannot and should not be seen as an end in itself. If anything, the goal should be an economy that is less dependent on imports for its day to day requirements.
This is where the CBN ought to have taken the views of the organised private sector more seriously in the making of the controversial policy. Insularity, in the current situation, is neither unhelpful nor productive. I say this because the business class wear the shoes; hence they ought to know where it hurts the most. The truth is – the restrictions are simply not working as it ought to. Moreover, it seems to me that the challenge facing the economy isn’t so much about curbing the influx of foreign goods as it is about giving the local entrepreneur the muscle to produce those goods locally and more competitively. Thus far, it has not.
And by the way, where is the wisdom in seeking to technically outlaw the importation of some 40 items while doing nothing about the capacity issues?
Still want to know the surest path to saving the naira? How about getting the economy revving full throttle first? Trust me, Emefiele and company wouldn’t need to bother about how forex are allocated after. That seems simple, isn’t it?
