Antidotes For CBN’s Missteps

Femi Akintunde-Johnson

We conclude today the vociferous denunciation of the struggles of the Yemi Cardoso-led Central Bank of Nigeria (CBN) by well-regarded economist and business strategist, Marcel Okeke during his radio chat a couple of weeks ago. He was asked: “What is the way forward? How can naira get better?”

  OKEKE: FAJ, let me tell you – that is why in some articles I’ve written in recent times, I called what the CBN is doing, even the federal government…anything and everything they are doing now is a panic measure. And that is where all you hear at the federal, state and local levels is palliative. That word, palliative, has now become the only word you hear in the Nigerian environment. Palliative, you know, is a medical term. You don’t use a way of managing the symptoms – not even the problems…so, now that they are talking about salary awards here, subsidized transportation there…opening up food markets in local government areas…all those are palliatives. 

Coming back to your main question, the government is applying what is called market forces in determining the demand and supply of the dollar…I mean the foreign exchange market. Since that time, demand has been overwhelmingly much higher than supply…and everyday it keeps rising. What has been the problem is scarcity – shortage of forex in the foreign exchange market. So, what the government must do, like yesterday, is to increase the supply of dollars. And FAJ, I must tell you, the mainstay of our economy today – where the dollar comes from – is still crude oil.  And as we speak, that sector is seriously challenged. We have oil theft. Unfortunately, let me tell you, the former president of this country, Olusegun Obasanjo said a few weeks ago that up to this moment, about 80% of oil produced is still being stolen. So what are we left with? 20%! So, under the control of OPEC we have only 20% to sell. Official statistics show that our oil production output is going down…and for many years, Nigeria has been producing far short of OPEC quota. Our quota is up to two million barrels per day…at a point we were producing around or below one million… see that gap between OPEC quota and our production? But they gave us statistics that we have somehow come up to 1.2…to 1.3… I’m telling you the OPEC quota is up to two million barrels per day. And the 2024 budget is based on the assumption that we will be producing 1.78m barrels per day. But as I’m talking to you, we have not been able to come up to 1.3 or 1.4… so, is the budget not terribly threatened already? The first quarter of the year is almost gone…so, it is only when the government deploy everything to secure and safeguard oil production, to raise the volume of exports, and so raise the volume of foreign exchange inflow from oil…that we may be able to handle this crisis we are having in foreign exchange market.

  That is on one hand. On the other hand, since the removal of the petroleum subsidy…it is now about nine months, what has the government done to get us refined fuel here… to get PMS locally? So that, instead of relying on 100% fuel importation, we’ll be relying on about 30% or 40%… because the truth is that most of our foreign exchange is being dissipated on the importation of PMS. So as soon as we are able to refine locally, and have 80% or more of our PMS locally, we will now save ourselves from frittering away a huge chunk of our available dollars. So, those are the things the government must do to save the situation…but that is why I said earlier that there’s no light at the end of the tunnel. 

  They have not started doing anything in this regard. Look at the Port Harcourt Refinery they say they are repairing, the Managing Director of NNPC has been making empty promises, and shifting the goalposts…he would say it’s next week…when next week comes, he would say it’s next month…when next month comes, he would say in next two months…and when next two months come, he would say it’s next quarter! But the truth is that as I speak to you, there’s no local refining…whether by government-owned refinery or even the Dangote one. The Dangote one has started, it’s not refining PMS…it’s refining some other products. And unfortunately, and seriously surprisingly, it is importing crude oil from outside to refine. Does that give us any breather?

  FAJ: Can we not insist on conducting international trade in our local currency?

  OKEKE: (Laughs) International trade! The Nigerian currency is very very weak. It’s very weak because we’re not productive. Because the respect of any country’s currency is a function of how productive and how diversified the economy is… that is why people do give China as an example. And when they look at the rate of exchange between the Chinese currency and the dollar, they say our currency is overvalued. No. Did you know that in China, if you begin to count the things that are produced there, and exported, you cannot finish naming them in one year! So that gives their currency the strength…but in Nigeria, like I told you, the only major thing we export is crude oil. And our economy has largely been import-dependent over the years…since the pre-colonial years, and the colonial times…our taste is dependent on outside…so, we always import more than we export. What do we even produce, apart from oil? Name it. 

  You see, all the main factories and companies you used to know, have all folded up. In recent months, you can count them: how many that have even left the economy of Nigeria. With that kind of scenario, our currency is weak, and will keep getting weaker. So, that is the situation, we cannot do what you’re proposing. We cannot use our currency, it’s not convertible.

  FAJ: What’s your parting advice to managers of our economy?

  OKEKE: First and foremost, we need improved security in Nigeria. Security. One of the major drivers of high inflationary rate that we have is food. So, we are talking about improving our agriculture in Nigeria. But the farmers cannot go back to their farms – whether mechanised farmers or subsistence farmers – because of the high level of insecurity. Unfortunately, the insecurity in the land… the kidnapping, the activities of bandits, and all that… are so serious in the region we call the food basket of this country, if you check. So, because of that it will always reflect in food scarcity. And then high prices of whatever is available. So, to begin with, we have to feed ourselves… government have to do everything humanly possible…it’s only people that are alive that will be talking about economic prosperity. So, let them put their focus on security, and secure us.

(CONCLUDED)