A Misguided Editorial On Buhari’s Refusal To Devalue Naira | Independent Newspapers Limited
Newsletter subscribe


A Misguided Editorial On Buhari’s Refusal To Devalue Naira

Posted: May 10, 2016 at 2:00 am   /   by   /   comments (0)



It is common practice in the print media for a Newspaper to identify and evaluate an issue of public significance and to make sensible recommendations that would be socially beneficial. Ultimately, after presumed exhaustive debate of the subject by a seasoned team of journalists and external consultants, a statement is distilled and published as the Newspaper’s Editorial opinion.

Invariably, the value of such opinions would depend largely on the diversity of knowledge and experience brought to the table by members of the Editorial Board, and the level of integrity which predicated the discussions. It is therefore not unusual that a dispassionate and incisive editorial could strike the right chord with the reading public to ultimately instigate decisions and or actions by appropriate authorities.

Consequently, Newspapers put a high premium on their Editorials, as wrong conclusions from poorly researched or partisan opinions could equally be wrapped in populist and powerful narratives that could unwittingly instigate the adoption and implementation of policies and processes which work against our common good. Indeed, interest groups, particularly political and business associations clearly recognise the potential value of the positive impact, on their aspirations and activities, of a favourable well crafted Editorial in a popular Newspaper.

In essence, with the prevailing depth of self interest and fiscal impunity, made possible with collaboration from inebriate Regulatory Agencies, and a fundamentally rent seeking rogue financial subsector, it is not unusual to find seemingly innocuous Newspaper opinions which appear superficially progressive, but on closer scrutiny, will be found to be clearly divisive or anti people; ultimately, such recommendations may in fact circuitously serve the selfish  ends of a target, elite interest group, regardless of the oppressive impact on the rest of us.

For example, despite the serious danger in presently allocating 35kobo out of every Naira of earned income to national debt service, some Editorials still call for increased government spending which will evidently be funded with further debt increase, despite the clearly oppressive cost of such loans; those Editorials which advocate higher budgets and increased spending, generally hide behind the camouflage of Nigeria’s national debt to GDP ratio, which still remains very modest! Similarly, some Editorials call for an urgent need to increase spending and diversify our economy, as if merely wishing will transform our fortunes, regardless of the prevailing double digit inflation rates which constrict consumer demand and deepen poverty. Furthermore, the possibility of diversifying the economy, and expanding business activities with increasing job opportunities will certainly also remain severely restrained so long as businesses are compelled to borrow at over 20 percent.


Nonetheless, such media disinformation seems perfectly fine, for example, with commercial banks, whose most lucrative customer base invariably become the CBN and other Departments and Agencies of government, to whom banks, unexpectedly allocate the lion’s share of available credit. Ironically, the trillions of Naira government borrowings are indirectly funded primarily from the cash reserves of the same banks, which benefit from the humongous slush funds, which are often stolen from the public treasury and warehoused in private bank accounts. Regrettably, the hollow cries, for diversification of our economy, would persist while the dilemma of the very troublesome and catalytic issues of unreasonably high inflation and interest rates, which cannot promote robust inclusive economic growth, will remain largely unnoticed without resolution.

In this regard, the Punch Newspaper Editorial of May 2nd titled “Buhari on Naira devaluation debate”, may have probably, unwittingly also played into the hands of the predators of increasing government debt and the rent seeking opportunities that evolve from an unrepentant monopolist forex market. However, despite this odious reality, the Editorial under reference, however, appears ‘innocently’ cofounded and therefore wonders why “Buhari is spurning the devaluation of the Naira?”! According to the editorial “the President’s logic is faulty, because, the fact that Nigeria never gained from devaluations of the past does not necessarily mean that a subsequent policy move in this direction may beget a disastrous outcome”. Unfortunately, the Editorial opinion gives no reason for the optimism for a positive impact from another major Naira devaluation, this time around, when nothing has in fact changed.


Curiously also, although the Editorial acknowledges that currency pegs allow Nations to keep inflation and export prices stable, it nonetheless hastily condemns “the present fixed exchange rate of N197-$”, together with the “limiting of dollar sales at the forex market, and the barring of 41 items from the official forex market”; It is not clear if the Editorial is therefore suggesting that import controls were inappropriate in the throes of our rapidly dwindling dollar reserves. Nonetheless, both real and speculative demand would have undoubtedly driven our reserves to crisis levels, if CBN had not quickly imposed these exchange controls.


Indeed, if the Naira rate was left un-pegged, and import controls were also removed, as obviously preferred, in the Editorial statement, the resultant acute shortage of dollars in just three months, would have pummelled the Naira exchange well beyond N1000=$ before year end. Thus, fuel prices (without any subsidy) would sell for close to N900/litre. If however, Nigerians resisted such a horrendous spike in fuel price with its severe inflationary consequences, government may compulsively once again, oppressively allocate over N450/litre (50 percent of market price) as subsidy on our daily petrol consumption of about 40 million litres. Unfortunately, in such event, over 20 percent of the total subsidy values will be lost to cross border fuel smugglers annually, as a result of lower fuel prices in Nigeria.


Indeed, President Buhari should in fact be commended, for recognizing and saving us from this tortuous reality that would have manifested if the Naira was further devalued. However, the writer of the Punch Editorial, regrettably seems rather uncomfortable that Buhari’s refusal to devalue the Naira also “enjoys the support of” in the words of the author, “the likes of Emeka Anyaoku, a former Secretary General of the Common wealth”, particularly, when, presumably other lettered and knowledgeable local and international experts, according to the Editorial, have recommended that the Naira be devalued!


The Editorial, also appears unduly concerned for example, that the call by a local scholar and member of the Monetary Policy Committee for an exchange of N220/$ was rebuffed. Indeed, if this recommendations was in fact implemented, it is unlikely that such a marginal depreciation would significantly reduce dollar demand, especially if the parallel market rate still hovers as high as N300=$1. Conversely, even if crude oil remains around $40/barrel, any attempt to bring the official exchange rate abreast with the current parallel market rate, will invariably propel fuel price (without subsidy) above N250/litre. Ironically, however, higher crude oil prices which will bolster our reserves will ‘unfortunately’, similarly instigate higher price of petrol well beyond N300/litre, even if the naira rate remains stable.

Incidentally, Buhari has repeatedly assured critics that he is willing to consider Naira devaluation if any benefit can be identified or realized by so doing. Consequently, the Punch Editorial should have endeavoured to identify any one of such possible benefits to support its subsumed advocacy for Naira devaluation. Regrettably, the Punch Editorial failed unconscionably in this respect. See www.Lesleba.com , Devaluation: IMF Vs Buhari.

Nevertheless, despite Buhari’s determination to resist devaluation, the gap between the official and parallel market rates may not reduce; and the Naira exchange rate will remain threatened if the CBN sustains its monopolistic auctions of dollars for higher Naira bids in a market with an embarrassing Naira surplus, which inexplicably also instigates increasing debt accumulation through CBN’s very expensive compulsive borrowings to control the unceasing surplus money supply.