DOLLAR RACKETEERING AND ENEMIES FROM WITHIN
By: Sir Henry Olujimi Boyo (Les Leba) first published in February 2016
Last week, this column republished ‘Latent Wealth with Debt Seeking Mindset.’ The article discusses Nigeria’s increasing debt burden, careless government spending, and the poor quality and standard of living that Nigerians are sentenced to as a result.
(See www.betternaijanow.com for this series and more articles by the Late Sir Henry Boyo)
This week’s article discusses the issues with monetary policy in Nigeria. A failing policy is a cry for closer examination. What is being ignored? What should be done differently? This piece outlines the prevailing occurrences in the Nigerian money market and what leaders must do to ensure the Naira retains significant value. Strategic roadmaps have been presented tirelessly by Sir Henry’s articles both before and after his death. When will the right thing be done?
As you read through the below article taking note of previous events and rates, keep in mind its initial publication (2016), a clear indication that Nigeria’s economic situationis yet to improve.
'There is nowhere in the world where Monetary Authorities fund Bureaus De Change (BDCs) directly with foreign exchange. The predominant patrons of Nigeria's BDCs are predominantly, smugglers of unauthorised items, treasury looters, and others who cannot process formal documentation to access official foreign exchange. Curiously, the CBN's formal policy to sell $400,000 weekly to each BDC translates to $1.6bn, for 1000 BDCs monthly.
Indeed, relatively cheaper BDC dollars mean cheaper smuggled goods and increasing distress to local industries and a boon to treasury looters and capital flight.
"Clearly, the present record-breaking revenue from oil earnings is not sustainable, but it is disturbing that we gleefully throw more official dollar revenue to BDCs, instead of the real sector, and it is worrisome, also that no less a person than CBN Governor, Chukwuma Soludo, embarked on such a foolish escapade!''
The above excerpt is from an article titled "Sale of Official Dollar Revenue to Bureau De Change"; published in August 2006 after CBN irresponsibly commenced direct allocation of official forex to BDCs; surprisingly, Soludo raised weekly allocations to each BDC to $1m shortly after.
Incidentally, the above piece was sequel to another article titled "Cheaper Black-Market Dollar" published a month earlier; excerpts from that article are as follows:
“In the wake of the Central Bank’s pseudo liberalization of dollar supply the Naira rate tumbled in the parallel market from over N140=$1 to today’s rate of about N130=$, leaving a spread of barely N2 from the official rate. Ordinarily, this outcome should be evidence of success of CBN's monetary reforms to eliminate multiple exchange rates and minimise the attendant economic distortions.
“In essence, however, CBN achieved this feat by bombarding the parallel market with dollars, from our presumably surfeit dollar reserves! Let us remind ourselves that BDCs worldwide, traditionally, serve a relatively small informal or itinerant market. Consequently, it is pertinent to ask to which purposes the $1.6bn monthly allocations to BDCs will be applied. The answer would most likely, be for importation of unauthorised goods, and the facilitation of capital flight, round tripping and money laundering by politicians and corrupt civil servants!
“Inexplicably, therefore, CBN is deliberately, consciously undermining its mandate for price stability and instead self-inflicting, distortion in our nation’s economy.
“For these reasons, some analysts hold that our monetary authorities have grossly misplaced their priorities, and also maintain that CBN's strategy for reducing the gap between the parallel and official market rates is akin to smashing a cockroach on a glass table with a sledge hammer! Conversely, these analysts explain that, in practice, the problem is not with dollar supply but the huge pool of naira released into the money market every time humongous Naira allocations are substituted for dollar denominated revenue. Thus, the higher the increase in Naira liquidity, the greater the demand for dollars from BDCs and the more serious also will be the distortions caused by smuggling and capital flight and the weaker, ultimately, will be the naira exchange rate.
“Consequently, CBN’s seeming laissez fair allocations to BDCs is regrettably, obviously a deliberate clandestine strategy to fund the dollar requirements of smugglers and treasury looters while pretending to defend naira value!'
“It is inexplicable that the IMF did not recommend that the challenges of multiple exchange rates, a weaker naira, spiraling inflation and stagnant economy could be more positively resolved if CBN’s dollar monopoly is immediately dismantled.”
In November 2010, barely four years after the above article, Muhammadu Abdullahi, CBN's Corporate Affairs Director confirmed in a media statement that “it had been inundated with complaints from foreign countries that some Nigerian travellers indulge in cross-border transportation of large sums of foreign currencies in cash, and that Nigerian Customs Services returns show that large amounts up to $3m cash have been taken out of the country by individuals in single trips (Business Punch, 4/11/2010, pg. 15).
The truth, of course, is that CBN has no business whatsoever funding BDCs!! Conversely If CBN, however, belatedly holds its nerve on this issue, and immediately stops dollar sales to all BDCs, we will once again witness a widening gap between official and black-market exchange rates! This would invariably provide CBN with a ready excuse to narrow the gap and again officially devalue the naira despite the obvious adverse impact on inflation, industrial production cost, economic growth, and employment!!''
Furthermore, the following is also excerpt from an article later published in October 2012 titled "Currency Trafficking, BDCs & CBN."
In October 2012, media reports confirmed that two men, Nkem Sebastian and Alhaji Tasiu Kura were apprehended by the Economic and Financial Crimes Commission (EFCC) operatives with about $986,000 found on them enroute to Dubai via Lagos and Kano International Airports respectively. The arrests, came barely 48 hours after the arrest of 24-year-old Abubakar Tijani Sheriff, whom EFCC described as a bulk money smuggler, with over $7 million at the Lagos International Airport, en route the United Arab Emirates. Unbelievably, these currency merchants were simply released immediately after forfeiting just 10% of the funds trafficked in accordance with the prevailing authorised slap on the wrist penalty.
Predictably, CBN’s ill-advised liberal dollar allocations to BDCs may have become a supportive tool for national economic sabotage and it is paradoxical, that CBN, despite its mandate for engendering price stability and sustaining industrial regeneration and promotion of increasing employment opportunities is actually the instigator of our industrial and economic backwardness and deepening poverty in Nigeria.
This uncomfortable conclusion is strangely obviously in sync with popular Punch columnist, Abimbola Adelakun's separate observation in an article titled (Buhari, Time We Stopped Lying to Ourselves) that "Like the budget itself, Nigeria was designed to sustain the mechanism through which corruption operates rather than advance the nation."
This tragic reflection has been, inadvertently, sadly also confirmed, with regards to the obviously misplaced positive public expectation from CBN's strategy for Naira stability, by President Buhari's recent revelation, during a chat with Nigerian residents in London, that his government"found out, that some top directors in the Central Bank own Bureau de change businesses"; so according to him, "when the foreign exchange comes, they take it and give government the change" and smile home with increasing profits from the forex scam at the expense of fellow Nigerians.
This unfortunate reality seems strangely akin to asking a goat to protect harvested yams; therefore, it is no surprise; that CBN Directors who have become stupendously enriched by the existing obtuse forex strategy, have solidly opposed alternative suggestions for managing the Naira as they eagerly sustain the selfish abnormality with effusive propaganda which, mischievously extol their concerted rape of the economy as best practice management.
SAVE THE NAIRA, SAVE NIGERIA!!