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WHO NEEDS A WEAK CURRENCY?
BY: LES LEBA (Email: lesleba@yahoo.com;
Blog page: www.betternaijanow.com
I recall my return from a trip abroad many years back, when the naira, was even stronger than the US$. In the event that I
had no naira to pay my taxi fare home from the airport, I offered to pay the taxi driver in US$; not surprisingly, the
driver politely turned down my offer and insisted on payment in naira, as he felt that “ko ni pe mi”, which literally
translated means that it would not serve his purpose as it could resort in shortage in his accounts at the end of the day!
Of course, a lot of water has gone under the bridge since that scenario, the naira has since depreciated by over 95% of its
value and now exchanges for about N130=US$1 and the love of the dollar is now the beginning of economic awareness.
I am always stunned by disbelief how our leaders in Africa have accepted the magnitude of devaluation of their currencies
since the wave of political independence four decades ago. Everywhere in Africa, with the possible exception of S/Africa
and one or two Arab States in N/Africa, national currencies have depreciated woefully to extremely unrealistic levels since
the colonial administrations departed. In countries such as Ghana and Zimbabwe, the post colonial rates of the local
currencies have fallen to below 0.0001 of the pre-independence value. In other words, a family which could conveniently
live on 1000 units of a country’s currency when the dollar was at par, would now need over 10,000000 (ten million units) of
the same currency to maintain their standard of living! Well, it is no secret that wage rates do not generally increase in
such geometrical leaps!
In this event, the members of our family under reference would need to work maybe ten times as hard as before to maintain
their standard of living. We know, however, that such increase in work rate is not feasible, as the number of hours in a
day remains static at 24! There is only one way out, the family would have to do away with a large number of those
expenditures which ensured that the family just maintains a subsistence life style. The growing level of poverty in most
African countries is the result of what may really be considered as an abnormal devaluation of the local currencies! The
need or drive by Africans to maintain a semblance of dignity in their lives in the face of the dwindling value of their
local currencies has led to massive brain drain of well-educated and professionally qualified people of African decent to
supposedly greener pastures in Europe, America, Canada, and even Asia.
In this event, most of these emigrants who have been educated and trained by dint of the sacrifice of parents, family or
local governments are forced to explore all available means to jump ship: thousands of African youths have died in the
Sahara Desert or the Mediterranean in their attempt to seek a better life abroad. African immigrants have now become the
suppliers of cheap labour in their host communities, all in an attempt to escape the indignities that their paltry incomes
in their home countries would inflict on them. Indeed, presently, millions of Africans at home now depend on the modest
individual dollar remittances via Western Union, Moneygram, etc from their children or wards abroad to make ends meet. The
dollar is now king and even school children know the black market value of major foreign currencies from their regular
interaction with money changers on behalf of aged parents or grand parents!
My experience of over two decades ago, when the airport taxi driver refused to accept the dollar is certainly unlikely to
occur in the current economic quagmire into which we have herded ourselves. The point being made here is that no amount of
legislation can force the adoption by a people of a currency which is generally regarded as weak or unstable. Indeed, a
people’s recognition of the strength of a currency cannot be favourably influenced by the proclamations and posturing of a
country’s monetary authorities, no matter how intimidating or seductive the message may be! The people know the truth and
will express their recognition in various ways which would include pricing their goods and services in an alternative
foreign currency.
It is in this light that one should view the CBN’s recent posturing about outlawing local transactions in dollar. The
D/Independent of 3/11/06 in a front page article reported Prof. Soludo’s disclosure that “It is illegal for malls, plazas
shop owners, schools, hotels and landlords, among others, to charge and collect dollars or any other currency apart from
the Nigerian naira.” Prof. Soludo insisted that “the naira is now very strong and has become a currency of choice….”
Commercially minded, observers and sincere Nigerians know that our eminent professor is being economical with the truth!
I agree with the CBN Governor’s assertion in the D/Independent report that “low inflation rate is (one of) the best gifts
that any government can give to the Nigerian poor man, because at least his N7,000 minimum wage will command stable
purchasing power”. This is good talk on the surface, but I am sure that the poor man whose N7,000 wage is an atomic
fraction of the N50m spent to celebrate a controversial award to the CBN Governor would prefer major improvement in his
purchasing power rather than the stability of a grossly inadequate salary, which amounts to about $50/month wage packet,
and which must suffice for the feeding, shelter and transportation of his family and the education of his children!
Inspite of such abject poverty, the CBN Top Dog extols the extant possibilities that the unprecedented reserves base of US
$41.4 billion offers. Some uncharitable critics have suggested that Prof. Soludo is, himself, guilty of promoting the
adoption of a foreign currency by continuing to state the value of our reserves with the dollar as a unit of account, while
most Nigerians wonder why the ‘excess’ reserves creates so much cash or excess liquidity in the money market, when the
three tiers of government are paid naira values. Worse still, industrialists and serious entrepreneurs wonder how the cost
of borrowing can remain so high, above 20% in the face of a market awash with surplus cash and yet no cash for SMEs who are
the engines of growth in every serious economy.
On my side, I find it difficult to understand how excess reserves of $41bn (20 month’s national imports cover) supports an
official exchange rate of N130=$1, when a paltry reserve base of $4bn (four months cover) in 1996 generated an exchange
rate of N80-$1. The above contradictions not withstanding, Professor Soludo in the D/Independent report believes that
inflation will fall and translate into higher living standards. Surely, only the good Professor believes this, as he is
yet to indicate how we can put the excess reserves to proper use without exacerbating excess liquidity and the high cost of
over N200bn used to clean up the excess naira from the system each year.
SAVE THE NAIRA, SAVE NIGERIANS!
