The issue with the Naira is not just that it is low in value. It is that the Naira is not stable but rather keeps falling. While the low rate makes it unviable to earn and trade in the Naira, that, in itself, is not too much of an economic disadvantage. In the theory of economics, it should spur activities towards taking advantage of the high price of forex against the Naira, which should then translate to increase in the supply of forex to the economy.
This should ultimately firm up the value of the Naira up to an equilibrium that should serve as a stable exchange rate for the national currency. Such stability would restore to the Naira the primary function of money as a store of value. People would save and transact their businesses more in the Naira which would then translate to sustained economic growth.
This process would rest on one foundation, which is that politicians would not act to increase the supply of the Naira recklessly because they find it easy to do so. The Government has the ability to print as much Naira as it desires to cover its appetite for spending either by printing money directly or by financial accommodation from the Central Bank of Nigeria in what is called ways and means. This consists in the Central Bank continuing to credit the account of Government with inexistent funds. Buhari survived on this. The fallout is what we are paying for now by way of runaway inflation.
However, Tinubu, by orientation, is not too different from Buhari in the department of spending. He has a corrupt edifice or what has been termed “structure of criminality” which he has to sustain. In addition, he has the African Big Man mentality which translates to unlimited spending to sustain the apparatus and paraphernalia of Government that shows off the President, and then other Government officials as belonging to a privileged class. Exotic cars and furniture, for instance, are purchased at whatever cost and the President moves in a long motorcade that is akin to pouring fuel directly into the ocean. All of these, at the end of the day, comes down to the Central Bank providing more funds to cover budget deficits and then ultimately to more Naira than is needed to sustain its value being pumped into the system. By character and orientation therefore, Tinubu is not the man for the job of managing a Naira in crisis.
Tinubu cannot provide what is needed to rescue the Naira from its free fall onto stability. Two things are critical in this regard. The first is frugality and financial discipline. The second is plugging all the holes from which foreign exchange earnings of the country keep pouring away in the oil and maritime sectors. Other measures that are also crucial include resuscitating the export of agricultural goods where we have comparative advantage and creating a favorable environment for export of services, ranging from entertainment, ICT and professional services.
Sustained inflow of foreign investment is another major factor in increasing forex inflow to sustain the Naira. Again, Tinubu has shown that he is incapable of providing the national security and efficient and corruption free bureaucracy that are crucial to bringing this about.
All in all, Nigeria needs a leadership with a different kind of orientation and style of doing business than what is in place to navigate ourselves out of the present financial crisis.
Published by Chuks Nwachuku
