CBN, operators differ on ruling exchange rate

lIt’s parallel market rate — Operators
lNo, it’s interbank rate — CBN
By Babajide Komolafe, Yinka kolawole & Nkiruka Nnorom
The Central Bank of Nigeria (CBN) and economic operators have
disagreed on the exchange rate that governs business decisions
and economic activities in the country. This disagreement was the
highlight of the first TheCable Coloquium titled, “The Naira on Trial:
To devalue or not”. While participants and panelists at the event
unanimously agreed that economic activities are being priced at
the parallel market exchange rate, which is N325 per dollar, the
CBN disagreed, saying that it is the interbank exchange rate, which
is currently N198 per dollar.
Emefiele CBN Governor
The panelists included Managing Director/Chief Executive, Financial
Derivatives, Mr. Bismarck Rewane; Deputy National President,
Nigeria Labour Congress, Mr. Issa Aremu; a Director of Lagos
Chamber of Commerce and Industry (LCCI), Dr Vincent Nwanem;
Director, Monetary Policy Department, Central Bank of Nigeria
(CBN) Mr. Moses Tule and Publisher/Chief Executive, BusinessDay,
Mr. Frank Aigbogun, who acted as moderator. The event also
featured a keynote address by Edo State Governor, Comrade
Adams Oshiomole.
When asked by the moderator, Mr. Aigbogun, which exchange
rate they believe presently governs business decisions and
economic activities in the country, Tule, who represented the CBN
said that the official exchange rate while the other panelists
disagreed, saying it is the parallel market exchange rate.
Responding to the question, Tule said: “The exchange rate that
governs business decisions in Nigeria today is the interbank rate.
However those who want to access foreign exchange for the
purpose of international travel cannot access it at the interbank
market, because of shortage of foreign exchange in the economy
they would rather go to the parallel market.
And because it is easier to get foreign exchange in that market at
whatever rate it looks as if it is the dominant market, whereas the
source of foreign exchange supply into that market is very small.
But for industrialists they are getting what they need at the
interbank market”.
Rewane however said, “Everybody in this hall knows that you
cannot get dollar at the interbank market rate. The reality is you
can get the dollar at the parallel market at whatever rate.” Similarly,
Vincent of LCCI insisted that it is not the official exchange rate but
the parallel market rate that presently governs business decisions
in the country.
Governor Oshiomole however said that the reality is that the real
value of a currency is not determined by the value of other
currencies but the value of goods it can purchase.
He said: “In my village the value of the naira has not changed. The
price of garri, the price of dodo (fried plantain), the price of yam,
the price of corn, has nothing to do with the exchange rate. Let us
stop looking at the value of a currency in terms of other
currencies but in terms of what it can purchase in the local
Exclude more items from forex market Earlier in his keynote
address, Governor Oshiomole called on the CBN and the federal
government to exclude more items from the foreign exchange
market in order to save the naira from further depreciation.
He said, “There is need to encourage the CBN to get more
aggressive. As we speak, we have more than one million Nigeria
kids going to school abroad consuming as much as half a billion
dollars in school fees. Some of us are saying that our children can
attend primary schools and secondary schools abroad and we
have enough primary and secondary schools in Nigeria, even in
Lagos, there are ones that pay as much as N300,000.
So, we have good schools, but for the elite, it has become status
symbol. If you must do that, I will suggest that CBN should not
fund, don’t provide money for those who want to do that. There
has been debate that let everybody who is in government ensure
that his children are trained in the farm, one way to do that is to
include school fees on the list of restricted items, so that if we
want our children to have good education and nobody can afford
it, all of us in political leadership will ensure that Nigeria universities
are working.
We have a lot of people going for medical treatment abroad,
which is called medical tourism and it runs into millions of dollars
a year, I will also submit that CBN should also include it on the list
of restricted items so that if we can not afford it we will ensure
that our hospitals function.
Devaluation will not curb importation Oshiomole said that further
devaluation will not solve the nation’s problem, especially the
appetite for imported goods, which he argued is the real problem
bedevilling the economy.
Citing statistics on foreign trade, he noted that previous bouts of
devaluations have not reduced importation of goods or increased
exportation as canvassed by proponents of devaluation, as
imports have continued to increase despite devaluation of naira.
He said, “More than that, the real critical question that settled this
debate is, will devaluation curb our appetite for imported goods?
The evidence with CBN shows that prices in the Nigerian economy
do not curb the appetite for foreign goods. The last time the CBN
devalued from N158 to N198 around 2014, as a matter of fact, our
export actually declined by 34.1 per cent and our import increased
by 2.9 per cent after that devaluation.
Now, I can imagine the reason you have this abnormality and this
brings us to the initial question. When human beings do not
labour to earn, they do not spend rationally and because you have
so much money in circulation at the time, this period also
coincided with the period politicians were preparing for election
and all the things that politicians have to do. If a lot of money is
accruing to people like that, their spending can not be rational, so
even if you devalue 300 per cent, it will not curb the appetite of the
elite for imported goods, imported toothpicks , frozen chicken,
and Brazilian hair.
“Human behaviour has to be conditioned by government policies.
If devaluation was an answer, from N1 to 1 dollar, we did not find
the answer; from $1 to N8, we did not find the answer; by 1999,
from $1 to N100, we did not get the answer. Soludo told us he
was going to peg the naira at N125 to $1 and he rolled out
economic statistics to support that. Some Nigerians said yes,
some said no, ‘we can not have that.’ Nigeria has not been
delivered.May things went wrong such that we had more dollars
in circulation than the naira.
For some of us in politics, you want money to pay your agent,
the bank tells you ‘sorry there is cashless policy’ but this cashless
policy did not affect the availability of raw dollars in the pocket of
Investment bankers prosecuting Naira
Oshiomole noted that the current agitation for devaluation of the
naira is been spearheaded by investment bankers, who thrive on
currency manipulation and speculations. He said, “Rather than the
government, as it used to be in the past, indicating its intention to
devalue, it is a section of the people that are behind this agitation.
Who are these people? The investment bankers who want to
trade on bonds and other commercial papers.
They don’t want any interference. You can use visas to restrict
and regulate the movement of human beings but CBN must not
use any instrument to regulate the movement of dollars in or out
of the country. Because if you do that you are interfering with
their calculations and projections, and the business of speculations
becomes less attractive. So I will submit that those who are
prosecuting the naira are investment bankers, those who make
money by just playing on exchange rates.
And they can trigger speculations and can harass you to take
panicky decisions. So for me, as I understand it, these are those
who are prosecuting the local currency and the naira is indeed on
trial. They are the ones demanding that currency should be
devalued and that CBN should not entertain any intervention.”
No pain, no gain
“What we require is a President with clear determination to
compel all of us to begin to think again, to maintain our position
and to reconcile it with current reality. Those who live on
speculation, we have no business supporting them. For people to
take our policies serious, I think we have as a matter of general
attitude move away from a regime in which we make policies in
the morning and reverse it in the evening.
“CBN has come up with 41 items that are not qualified for foreign
exchange at the official window, but I think that number should
even be increased. We have no business importing rice. When
you look at import base in Nigeria, how can we spend so much
on agriculture and yet we are importing so much. So, for me, I
support the effort of the CBN and Mr. President that even these
items be included;
Who amongst us wants us to continue to import toothpick,
tomato puree and all of those stuffs we can easily produce here,
including textiles materials? So, we need a determined state that
gives clear signal and that is why we stand by statement by the
President, ‘I will not devalue, it is very important.’
“The truth is that there are a lot of people waiting, hoping that
these things will change. They are not going to change because
when Mr. President speaks, he does the thinking before speaking.
So, he is not going to reverse it; let people reconcile themselves
with the reality. What I want us to also appreciate is the fact that
we are not dealing just with real demand of goods and services; a
lot of money that was stolen for election purposes was converted
to dollars if you follow the narratives in the Newspapers, all of that
translates to demand and pressure on Naira, so this is artificial.
It is speculation and accruals of corruption from rent and therefore
they are not result of legitimate economic transactions and
therefore public policy cannot be formed by that corrupt practices.
I want Nigerians to appreciate that no pain, no gain. We have a
new government and he has come out with new policies, we
should support the government and watch to see how things
play out.”
NLC demands N48,000 minimum wage
In his own contributions, Deputy National President, Nigeria
Labour Congress (NLC), Comrade Issa Aremu, warned against
further devaluation, saying that previous devaluation has eroded
the value of the minimum wage.
He said, “The last time we signed the minimum wage, which is
N18,000, and is the current rate, and this was between 2009 and
2010, this translated to $124 .
But now on account of depreciation alone, this $124 minimum
wage figure has dropped to less than $60. So wages have been
completely eroded on account of devaluation. So in nominal
terms, if we are talking just on account of the exchange rate, the
minimum wage which is currently N18,000 should be about
N48,000. And I am leaving this warning, if you dare devalue
again, be sure that labour will also have to hike its own price in the
market. That is just clear cut.
That is why NLC is prepared to submit our new proposal for
minimum wage increase. This will be done, whether through
battle, through struggle, we will get that result, because the
money that is not paid to the people, we have seen, will be
Forex restrictions
threaten 80,000 jobs
Meanwhile the Lagos Chamber of Commerce and Industry (LCCI)
in its contribution warned that the current foreign exchange
restrictions especially the exclusion of 41 items from the foreign
exchange market might lead to loss of 80,000 jobs in the
manufacturing sector. This he said was due to inability of
manufacturers to access foreign exchange even for items not
Speaking on behalf of the Chamber at TheCable Colloquium, Dr
Vincent Nwanem, said, “Is the high rate an issue for
manufacturers? No, the major issue now is access. Even the
goods that are not listed in the 41 items, our members cannot
even fund dollars to fund them. I can tell you that about 80,000
jobs are at risk in the manufacturing sector.”
We need a forex policy
On his part, Managing Director/Chief Executive, Financial
Derivatives Company Limited, Mr. Bismarck Rewane, said that the
issue is not the exchange rate of the naira but the absence of a
process of determining the exchange rate. He said, “The
discussion should shift from whether to devalue or not to devalue
to what are the implications of an absence of an exchange rate
The exchange rate is a number, it is like a multiple choice question,
the answer can be N250, N190 and even by the time you finish
that rate is already into disequilibrium. So the debate is, do you
have an exchange rate policy, and if you don’t have one, what are
the consequences “In this country, 10 to 15 years ago, you had
Western Union, you had Moneygram. These people were
bringing money into Nigeria.
Nigerians in Diaspora had about $21 billion earnings every year,
which can come in. Why are they not bringing it this year? The
CBN tells us they have disbursed over $8 billion to BDCs in the last
two years, who are the BDCs?
If I am a manufacturer and you give me money to bring in goods
manufacture today, I have two options. Bringing the goods ate
N199, manufacture it and sell it in the market at N199 or price
those goods at N303 because the current price is already factored
into it.
Or brings the money in rather than bring in raw materials, I open
an LC and bring in nothing, go across the road and sell the dollars
which I bought at N199, at N300 and hence make a 50 per cent
gain. I do not have to employ anybody. That is what is
“Presently there are certain people who are bragging that they can
bribe people in certain agencies in Nigeria and get approval. So
there is no certainty as to whether when you apply for foreign
exchange, when you will get it. The system is being abused by
corrupt people and some of the people sitting here today are
saying they want the policy to remain the same so that they can
continue to abuse and steal the money under the guise that they
are protecting the currency.
“In 2008 there were people who moved money out of this
country in anticipation of devaluation only to bring it back to make
a killing. So the devaluation debate is not as apolitical as people
want to believe, there are vested interest in keeping the currency
at one side of the other and they would pretend under any guise
to say they are saving Nigeria.
“The narrative is not about patriotism but about competitiveness.
Whether you like it or not you will have to provide currency in an
import dependent economy.
So the issue here is currency flexibility. In the end, we have to two
options. Do something and have a policy or do nothing. If you do
nothing, the outcome will be palaver. The second option, if you
do something, the outcome will be like R Kelly sang, the storm is

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