Opinion: President Buhari or IMF – Who has better policy on Naira‘s elasticity

 

 

By Emeka Chiakwelu
The currency of a nation is a vanguard bulwark and safeguard to the wealth
of a nation. Nigeria’s naira holds the intrinsic and inclusive value to
country’s GDP and wellbeing. A deteriorated and weaken naira invites
aggressive currency speculators to devour the wealth of a nation. Naira
value must be aggressively protected because a given currency can be use
to monetize debt and for settlement of debts but not necessarily for
credit liquidity. This is why currency can be subjected to herculean
inflationary trend when its elasticity approaches a deformed point.

From the BEGINNING, President Buhari has never been comfortable with
outright devaluation of the naira. But as time goes and changes comes, it
becomes imperative that naira devaluation maybe inevitable as pressure
mounts from inside and outside the country.
Economic and monetary policy impulses notwithstanding, the real clamoring
for devaluation was coming from international bodies especially IMF and
top global financial media together with Nigerian experts that imbibe any
economic theories coming from London, Paris or New York. For some of our
local financial experts, to belong means to be carrying “banner of no pale
pastels, but bold colors” membership card of the neoliberal globalization
gang.
Nevertheless, I am not implying that the apparent Nigeria’s economic
reality must not be acknowledged. The erstwhile propping up of the fixed
naira rate with dwindling foreign reserve cannot be sustained. The
nosedived of oil price and Nigeria’s incoherent economic policy are
effecting the value of naira. Simultaneously, the uncontrollable free flow
of naira has its downside too. As Nigeria proceeds with new policy on
naira devaluation, interval evaluation and introspection cannot be
neglected.

President Buhari questioned the benefit of the currency flexibility policy
that has brought about 40 percent of naira devaluation as he spoke to the
country’s business cream of crop at Aso Rock:

“I don’t like the returns I get from the CBN concerning the devaluation
of the Naira. In August 1985, the Naria was N1.3 to a dollar but now you
need N300 or N350 to a dollar. What do we derive from that? How much
benefit can we derive from this ruthless devaluation of the Naira? “I’m
not an economist neither a businessman, I fail to appreciate what the
economic explanation is. What has happened to us now is that we have
maneuvered ourselves into mono-economy which led to the collapse we are
seeing now”.
The point Mr. President has succinctly made with above mentioned
commentary was that the peril of naira devaluation has detrimental effect
on the macroeconomic stability of Nigeria. The rising unemployment, hunger
and economic dislocations can be attributed to the steep-curve rising
inflation that has its root on the currency flexibility policy and the
subsequent massive naira devaluation.
I will recommend to the presidency and top monetary policy makers to
organize an international seminar in Abuja where the pro and cons of naira
devaluation can be debated for its worth. The outcome of the seminar and
debate will give Nigeria the upper hand to make a decision based on
detailed and coherent economic policy rationzation.

A review and evaluation of the state of naira will not imply that
flexibility policy will be abandon. But a measured, prudent and calculated
devaluation will be incorporated to avoid total destruction of the worth
of the country’s medium of exchange. If things are left the way they are
with regards to the unchecked currency floating, Nigeria’s lopsided
economy cannot be sustainable with limited supply of dollar.
Emeka Chiakwelu, Principal Policy Strategist at AFRIPOL. His works have
appeared in Wall Street Journal, Huffington Post, Forbes and many other
important journals around the world. His writings have also been cited in
many economic books, publications and many institutions of higher learning
including tagteam Harvard Education. Africa Political & Economic Strategic
Center (AFRIPOL) is foremost a public policy center whose fundamental
objective is to broaden the parameters of public policy debates in Africa.
To advocate, promote and encourage free enterprise, democracy, sustainable
green environment, human rights, conflict resolutions, transparency and
probity in Africa. info@afripol.org http://www.afripol.org

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