A REQUEST BUHARI MUST REJECT
Further devaluation will inflict irreparable damage on Nigerians and every sector of the economy as well as the collapse of education and the middle class
Recently I commended President Muhammadu Buhari for his decision to put a halt to further devaluation of the naira. I discussed the effects which previous devaluations still continue to have on the economy and suggested other steps which the government could explore to improve the revenue base of the country and improve the economy. This week I intend to briefly revisit this issue as calls for the devaluation of the naira appear to be unending. Some Nigerians continue to argue that further devaluation of the nation’s currency remains the only panacea out of the economic and financial problems currently troubling Nigeria.
SANUSI’S CALL FOR FURTHER DEVALUATION
My decision to revisit this issue became even more imperative as the former Governor of the Central Bank of Nigeria and currently the Emir of Kano, Alhaji Muhammadu Sanusi also spoke out recently in support of a further devaluation. He is reported to have stated as follows amongst others:
“in the first two quarters of this year, this country spent over 500 billion naira on debt servicing. At end of this year, it will be over 1trillion which is more than the amount of money budgeted for health, education and defence combined….There is no room in the government’s balance sheet for borrowing and spending. We have no option but to block leakages and to stop non-priority expenditures….It is for this reason that we cannot afford to spend all our time talking about the past. It is time to look at what we are doing now and ask ourselves if the fiscal stance and monetary stance are the appropriate stances for the situation we are in….Does it make sense at this time for the government to continue paying petroleum subsidy? It does not, and we must say it…we are Africa’s biggest oil producer but the biggest export from the United Kingdom to Nigeria is petroleum products. We don’t refine our own crude. We don’t have a petro-chemical industry. We burn our gas and we don’t have enough electricity…We produce cotton and import textiles from China. We have a large tomato belt and we import tomato paste. Everywhere you turn…we produce cassava, we don’t produce starch. And what we don’t have we export. It is so bad that we had a military government that conducted free democratic elections in Liberia. We exported democracy when we had a military government…Let’s stop being in denial, we cannot artificially hold up the currency…The central bank’s moves are hurting the economy…We are depriving certain key industries of imports…If we have to make a choice between economic growth and a devaluation, my recommendation is that we protect growth..The portfolio flows are gone,” Inflation is already upon us. You have fiscal consolidation. It is time to loosen monetary policy. Otherwise we compound an exchange rate crisis for businesses with high borrowing costs and declining demand.”
I do not doubt that Alhaji Sanusi has spoken out of a real concern for the fortunes of the country and the direction it is headed in the coming months given the failure of the price of Oil to rebound after its slump of last year and the resultant effect on the Federal Government and those of the states that are now struggling to meet basic demands.
However I remain of the view that the issues on the question of whether or not to devalue the naira further are extremely serious and require very deep reflection and consideration. Further devaluation of the naira will only serve to cause intense hardship on Nigerians as virtually every sector is affected. In this regard one can use the educational sector as an example. Having served for years as the Pro-Chancellor and Chairman of the Governing Council of the University of Lagos before going to establish the AfeBabalola University I believe I am in a position to explain the effects which past devaluations had on education in Nigeria and how any further devaluation may well spell doom for the sector.
One problem which has plagued the University system in Nigeria has been departure of highly qualified personnel to other countries in search of the proverbial Golden Fleece. Many were pushed to abandon their jobs in Nigerian Universities owing to the fact that the naira had lost its value. Thus when many compared their salaries with those of their counterparts in other countries it became apparent that any patriotic consideration they might have entertained would easily give way to economic realities. This loss of qualified manpower seriously affected the Universities. However in recent times many of those who left have begun to consider returning home to help in the quest to improve standards at home. It is therefore most unfortunate that many will be returning to meet dilapidated structures and ill-equipped laboratories in most universities. At the moment owing to the widening gap in the exchange rate, most universities cannot even provide the most basic of facilities needed to train their students. To therefore advocate further devaluation, in my estimation is akin to advocating a total collapse of the educational system. Not only will Nigerian Universities continue to lose qualified hands, they will also suffer in their primary duty which is the impartation of quality education to the future generation of Nigerians. The long term effect of this is best left to the imagination.
GENERAL EFFECT OF DEVALUATION
On a larger scale I must reiterate again that further devaluation will further bring hardship and finally destroy whatever is left of the middle class in Nigeria. In relation to this I have already stated that:
“These developments effectively destroyed the middle class in Nigeria and as Political and Economic analyst all agree, the Middle Class is the driving force of any economy. Without a middle class a country is doomed economically and politically. On the 7th December 2011 President Barrack Obama in a speech delivered on the importance of the middle class stated as follows:
“When middle-class families can no longer afford to buy the goods and services that businesses are selling, it drags down the entire economy from top to bottom. … that’s why a CEO like Henry Ford made it his mission to pay his workers enough so they could buy the cars they made.”
For the above reasons I urge President Buhari to remain steadfast in the resolve of the current administration not to devaluate the Naira further. Nigeria must not give in to external pressure or influence on it to adopt that measure. The country has had enough of devaluations.
AARE AFE BABALOLA SAN, CON