Poor Naira, the gravitational pull is severe: ‘Operatives of the Economic and Financial Crimes Commission raided the offices of black market currency dealers in Abuja on Tuesday in a bid to halt the rapid fall of the naira… “For now, there is no dollar to sell. This morning (Tuesday), a dollar was selling for N850, while I bought a dollar at N840.. As of 1.53p.m, the USD was selling between N870 and N900 depending on sellers and buyers bargaining power,” another BDC operator told PREMIUM TIMES.’
While we commend the grand vision of the Central Bank of Nigeria to curb many vices by redesigning Naira, its implementation is poor. I had called the move which is commendable a draw: CBN scored a hat trick but it also conceded three.
Saving the Naira cannot come from EFCC and CBN headquarters since both cannot control the demand and supply equilibrium in all domains. Provided 85% of Naira cash will be emerging from underground vaults, and EFCC using its searchlights will not allow those players to deposit them in banks, the only option for them is to buy any foreign currency, in view, at any rate!
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As that happens, Naira will have a long harmattan season. The apex bank made a huge mistake by not coordinating this playbook with the finance ministry to model the welfare shocks. While in banking, I spent time researching currency (the topic of my doctorate and many briefs in African Union Congress). One of the critical elements when it comes to currency changes is to look at welfare losses. Did CBN model that? If it did, how did the government prepare?
People, I feel extremely disappointed on how the Nigerian leaders keep scoring own-goals against their own people. Did they not expect the Naira to have pressure as a result of this policy?
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Comment 1: They didn’t expect any pressures as systems thinking was probably not even remotely applied.
You think “I wanna do this, and this is how it will help”, without thinking of what it will break along the way.
Comment 2: They didn’t, Prof. We need guys like you in government. Unfortunately, we hardly ever have any. Why? Because the muds out there are dirty. True intellectuals who have solutions would prefer to use them in business and make a living for themselves than risk the muds. Sadly.”
My Response: Indeed., Even if they do not have funds/time to do research and model the shocks, there are dozens of papers which would have helped them. There are many models to use. While in banking, I studied currency during my postgraduate studies in Banking and Finance. For the African Union, World Bank, etc I had published on this domain http://www.afrique-gouvernance.net/bdf_document-1255_en.html . I had expected CBN to have plans ahead to cushion the impact of sudden supply of Naira which cannot find a clear destination. It seems that is not the case. Now, the bank will talk to that finance minister it did not have the courtesy to consult initially.
Comment 3: We are always not prepared for everything! When are we going to get it right?
The people they are suspecting won’t bother bringing their money to the bank. Nothing will compel them to do so. Because they know the implications!
They will keep patronizing the black market. It’s a win-win for them since dollar will probably keep rising.
CBN to Issue New Naira Notes From Dec 15, Old Notes Cease to Be Legal Tender Jan 31 2023
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Whatever the naira is currently exchanged for dollar is not its true value, we do not need to sensationalize current events. The redesign was a good call, but we also live in a society where there are too many bad people. So, any formula you bring, you will always have plenty people who are ready to thwart it, because their source of livelihood is from the chaotic system you are trying to fix.
At this point, blaming the CBN is ineffective, because Nigeria is under attack here, what should be occupying our minds right now is how best to arrest the situation. Can the government declare collection of cash for dollar exchange in black market illegal? No matter how ingenious bad actors are, the state has more tools to fight. If you place embargo on cash exchange for dollars, it means that anyone who holds large amounts of cash cannot get same into the financial system, without triggering an alarm.
As for welfare losses, we can keep food, fuel and possibly local building materials immune from inflation, it’s very possible because God has already blessed us with land and resources, our only contribution is to put them to productive use.
We can win this attack on naira and preserve welfare, the only doubt here is caliber of managers.
The redesign of the naira is the most revolutionary decision coming from Nigeria in a long time. Every decision is a risk. The risk of having over 75% of ur currency outside the banking system, is higher than that of increasing dollar value.
The impact of the decision on the upcoming election is predictable and largely positive. Nigeria is not the only country suffering the impact of the pressure by several countries not in support of dollar, to remove it as primary reserve currency. When people take sides there are expected costs. We are bearing this pain now. It will be over soon.
I think the best option is to close all the forging account in this country and let us operate only with naria and if possible we are to seed or receive money from other countries the bank should value it and pay with naria, we don’t want Dolla anymore.