Question: “You did not support the floating of Naira. But the floating is designed to make Nigeria make things locally by closing the gap between the official and black rates of Naira with foreign currencies like US dollar. What is wrong with that?”

My Response: The irony is that you could have done all those without the float!  We need to understand that even China does not fully float the Yuan for an opposite reason (if it floats, the currency will become stronger which it does not want since it is export-dependent. If you have things to export, a weaker currency helps you). What China does is to artificially track the US dollars, and with the funds it has in global reserves, it has been able to achieve that.

Unless you are fully advanced with “international currencies” like the USD, UK, Euro, Yen, etc, OR you generate so much foreign reserves like Russia’s rubles before the Ukraine war,  floating is very risky. In Saudi Arabia, for decades, they did not bother: they simply pegged their currency to USD dollar, with no float, and they have had the foreign reserves to defend that status

Floating has limited values for most countries. The biggest risk in such economies is not the variation between official and black market rates, but the instability in the exchange rate. In other words, that official rate is N415/$ and black rate is N550/$ is a smaller problem compared with weekly gyrations of the currency.

I used to write a lot on currency;  I earned a doctoral degree in banking/finance with focus on international markets and global currency as a banker. I played a core role in advising the African Union  to modulate on a single currency a decade ago via many lead papers and briefs https://base.afrique-gouvernance.net/docs/volume_21.pdf .

I had argued that welfare loss was evident in the model as the heterogeneous nature of Africa’s economy will make it nearly impossible for any supranational bank to deliver value across the continent in a fair way. Today, national central banks have tools to adjust as they want; under a single continental policy, most of those tools will disappear, making what happens in Nigeria to affect Togo, Benin Republic, etc whether they like it or not.

More so, the decades-long monetary union in the CEMAC union did not make that area economically better, and if that is the case, what magic would a single currency deliver? Currency union cannot do what industrialization policy could not deliver.

On Nigeria’s policy, I took just 30 minutes to do basic modeling and extrapolated for 12 months, and concluded that floating would cause “severe economic perturbations in the economy”. Right there, you could see welfare losses! I have always argued for our policymakers to publish briefs as they make policies. If they do, things will improve because all of us can help improve models for better outcomes.

For decades, no one understands how we make policies in Nigeria because no one publishes briefs or working papers which our university professors could challenge, refine, etc to advance the nation. We must change that playbook in the nation.

Question: “You did not support the floating of Naira. But the floating is designed to make Nigeria make things locally by closing the gap between the official and black rates of Naira with foreign currencies like US dollar. What is wrong with that?”

My Response: The irony is… pic.twitter.com/fMMh2qdw12

— Ndubuisi Ekekwe (@ndekekwe) February 1, 2024

1. Nigeria floats its currency.

My response: “Nigeria’s floating of its currency, while progressive, will cause severe perturbations in the economy – and a stable state may not come as most experts have predicted” – Ndubuisi Ekekwe, June 2023

2. JP Morgan projects that Naira will settle at N600/$ post-float.

My response: ‘“My perspective: I think JP Morgan may need to review. Whether you float, swim or fly Naira, Naira can only survive if the economy is productive with capacity to produce things (digital, physical, service, etc) to reposition the nation’s balance of payment and trade.”’ – Ndubuisi Ekekwe, June 2023

Can these people pay attention to village boys and girls as they work to fix Naira which has hit an excess of N1400/$? We were lone dissenters to the broad general positive consensus on Naira floating. Of course, I would be happier if We The People here were wrong! Do they read us? Village boys and girls do have things to contribute!

1. Nigeria floats its currency.
My response: “Nigeria’s floating of its currency, while progressive, will cause severe perturbations in the economy – and a stable state may not come as most experts have predicted” – Ndubuisi Ekekwe, June 2023 https://t.co/fwEmi2DQhf

2. JP Morgan… pic.twitter.com/vkQNI4gQ0D

— Ndubuisi Ekekwe (@ndekekwe) January 31, 2024

Comment on Feed:

Comment 1: Our country is in need of a major reset, if we can’t earn USD to sustain our dependence on the consumption of foreign goods and services and we can’t switch to the consumption of locally available goods and services, let the naira remain floating to help us with the difficult but necessary reset.

In my view, no policy has exposed the failure of the Nigerian elites more than the policy on the floating of the naira. We need to start the unavoidable shift to the local transformation of locally available resources to create the goods and services for local consumption and export. We need to start growing cotton and start converting same to the textile that we need without any excuses. We need to sustain the refining of our crude oil to start producing the petrol and diesel that we use.

If we can’t grow wheat, we need to start baking and consuming Cassava bread.
The Nigerian elites must take the lead in the redesign of the Nigerian economy.
Let the naira remain floating to help us with making that critical but necessary mindset switch.

According to Newton’s law of inertia, the condition that we have been accustomed to for decades will not change without a force, that force is the floating of the naira.
Let the naira keep floating.

My Response: The irony is that you could have done all those without the float!  We need to understand that even China does not float the Yuan for an opposite reason (if it floats, the currency will become stronger which it does not want since it is export-dependent). What China does is to artificially track the US dollars and with the funds it has, and it achieves that. 

Unless you are fully advanced with “international currencies” like the USD, UK, Euro, Yen, etc, OR you generate so much foreign reserves like rubles (Russia before war) floating is very risky. In Saudi Arabia, for decades, they did not bother: they pegged their currency to USD dollar, no float.

Floating had limited values for most countries. The biggest risk in such economies is not the variation between official and black market rates, but the instability in the exchange rate. I earned a doctoral degree in this space with focus on international markets and global currency as a banker. I played a core role pushing the African Union out of a single currency a decade ago in many lead papers https://base.afrique-gouvernance.net/docs/volume_21.pdf . If you look at the data, what Nigeria did was not smart on this floating.