Clairvoyant Hindsight In The Foresight Of Now By Nasiru Suwaid
Right from the beginning of civilization, when the human society began to merge into organized communities, one of the most unique attributes to have is the ability to predict the future, to be able to tell what might become of a person, a community, a village, a kingdom or an empire. Indeed, during the biblical times, when the organized society began evolve into a sophisticated formations, where religion was formed to crystallize the society into a state of order, that involve the reception of the scriptural text, in the context of its teachings which decree the mode of worship, constitutional management of the nation-state and the guiding pronouncement of how leaders could be just, fair, honest, accountable and responsible to the citizens who allowed them rule over their domicile.
Indeed, one of the confirmatory attributes of being the creator’s messenger or achieving prophet hood, within the faithful confines and religious fold of the Abrahamic faiths, it is the ability to exhibit signs of having a communion with an omniscient God, either directly or through the grace of the holy angels.
As such, people who often proclaim the power, to have known what had became are a rare breed of human beings, thus, when the administration of President Muhammadu Buhari (PMB) last week, stopped the allocation of foreign exchange currency or if I am to be most specific, withdrawn the provision for the allocation of the United States dollar at a subsidized official price, to the marketers of refined Petroleum Motor Spirit (PMS), principally, because it is not economically unsustainable.
Many an economic pundit became a clairvoyant seer, who immediately premised what happened as the result of a delayed non-adjustment of the naira, that had the government have had the courage to devalue earlier, to somewhere in the range of about 250 naira, it would have affected the supply side mechanism of the market fundamentals and stabilized the national currency on that valuation. Unfortunately, there is no empirical evidence to back such a contention, in fact, the astronomical rise in the in the value of the dollar after the subsidy removal, have vindicated Mr. President on his reluctance to remove petroleum subsidy, because, it had the capacity to send the naira into a downward spiral, as it is being seen today.
In fact, even if we had put the horse before the cart and did the most appropriate thing, which is devaluating the naira first before removal of petroleum subsidy, the fact of having an acceptable price, relative to the pricing of the dollar in black market, cannot all of a sudden make Nigeria a country the relies on financial remittances, to impact the supply side of the market.
As basically, Nigeria is simply a country that depends on crude oil receipts for foreign exchange and to argue otherwise, it is to pander to unproven and irrational economic logic, indeed, even the International Monetary Fund (IMF) has agreed that diversification of the economic output, from crude to other produce and products, it is the only avenue to generate enough international revenue income for the national economy.
Effective economic managers do not create uncertainty in the market or replace one uncertainty with another form of uncertainty, the first uncertainty being the price of American dollar in the black market being significantly different and higher from the price in the official exchange market, thus enshrining a distortion, while the second uncertainty, which is to replace the other uncertainty is acting to devalue, on an unproven of remittance flowing to impact on supply side fundamentals of the foreign exchange market.
However, the most dangerous situation is starting a devaluation that sends the currency into a negative spiral, which also creates an uncertainty that is even worse than pegging the currency in an inappropriate valuation range, because, an investor who is abhorrent of an unrealistic official rate, cannot be emboldened by a currency that fluctuates every other trading day.
The question to ponder though is the fact that globally, economic slowdowns or recessions usually come in circles of intermittent periods of falling growths and most importantly, it is not caused by the low value of a national currency or the inappropriate pricing of energy utility, rather, what causes such an economic crisis is loss of income revenue receipt, coupled with the happenstance reality of a nation which has not saved.
Indeed, those two elements are the most easiest to correct, with appropriate pricing of the economic components; in the case of the national currency, making it to lose value to reflect the income productivity of the nation, while for the petroleum pricing, which is subsidized at an unsustainable cost to the economy, the pricing range could be moved upwards to free funds for a more economically impacting spending, which could be tangibly and accountably monitored as being reflected on the people.
But, what is even more difficult is managing the diversification of an economy, when its income is not sustainably adequate, as to finance the formulation of a new national cultural vocation, where a country adopts a different mode of produce, products and productivity to gain foreign currency income, through international trade. It is just like managing personal finances of an individual, as you just can’t change jobs or start another occupational trade, without first resigning from the former job or disengaging from a vocation and living on the savings of the past labour, until an appointment letter is secured or an idea for new entrepreneurship scheme is born and developed into a viable business enterprise.
And this other thing:
AS THE MPC MEETS NEXT WEEK
Next week, the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC), would have one of its most crucial and important meetings in recent years, during a time of rising high inflation and on a season of spiraling downward fluctuation in the price of the naira, as against the value of the American dollar in the unofficial black market. The challenge primarily is the predicament, whether to devalue the Nigerian national currency in order to ease pressure on it and most significantly, what should be the criteria for arriving at an appropriate value for the naira, should the price of the local currency in the black market, be the sole determinant format and determining factor in pricing the naira.
Most especially as, a black market in Nigeria is an un-standardized forum for currency exchange without any depth in liquidity, it also does not have a settled criteria for determining what constitutes, the aggregate fundamentals of the operating market environment. In the end, how to re-assess the value of naira, must be achieved without considerably increasing the rate of inflation in the economy, also, any devaluation, must take cognizance of the fact, it is not about creating further uncertainty into the market environment and the proclamation introducing whatever decision that is reached, must be firm as it is convincing, that, it is not to be seen as weak and indecisive, as to encourage further speculative trading on the naira.
By and large, the announcement must be clear and precise, that devaluation would neither be a usual or a normal occurrence nor would it ever be motivated to re-occur, by speculative activities in the black market, which is obviously difficult as well as being a gratuitously unsatisfying task, that would need to be meandered through, on variables that are neither constant nor predictable or even controllable, yet, that is the burden of operating a modern economy, facing challenges of growth, in an era of global economic slowdown.
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