Opinion: The Nigerian FX Crisis and the Cost of Crony Capitalism By Suleiman Rotimi
Recent data released by the NBS show that inflation has risen to over 10% in the past months and annual growth has dipped to within 3% – 4% from a projected high of 7 – 8%. The Nigerian stock exchange is one of the poorest performing in Africa. How have we got here? Whilst a myriad of issues exist, the Forex crisis as well as a reduction in FDI and capital inflows have added great pressure on the economy. Some blame these woes on Goldman Sach’s delisting of Nigeria from its Emerging Market Bond index – saying that this has affected investor confidence. However, I choose to disagree. Systemic issues abound across Nigeria and once the fundamentals are wrong, there is little incentive to encourage investors to come in – the world is always watching. Two key issues are, CRONY CAPITALISM and CORRUPTION. I need not rehash what we all know about the problems of corruption in Nigeria but instead will focus on the issue of Crony Capitalism using the Nigerian FX system as a case study and which is effectively making a joke of what should be a free market economy in Nigeria.
Before I continue, I will like to define CRONY CAPITALISM and CORRUPTION.
“CRONY CAPITALISM – An economy that is nominally free-market, but allows for preferential regulation and other favorable government intervention based on personal relationships. In such a system, the false appearance of “pure” capitalism is publicly maintained to preserve the exclusive influence of well-connected individuals – Business Dictionary”
“CORRUPTION – The abuse of entrusted power for private gain – Transparency International”
Nigeria is a vast and beautiful country, however the beauty, the resources, the wealth and the collective strength of this great nation is being ruined by corruption. Nigeria grapples with the attendant effects of low oil prices and currency restrictions, there have been huge attempts to brand the current problems as caused by demand for FX by those schooling abroad and going for medical treatment.
Sadly, there are plenty of greed addicts that are prevalent in our society which are pushing people in hundreds of thousands into abject poverty. Yet we have energetic youth who are too busy to be concerned about this inevitable weed. As young people we do not know our strength as a unit is the only solution that can uproot the weed of corruption. We alone can push for positive reforms and then we not only dream but also work together actively hand in hand towards developing a nation that is free from the evil called ‘CORRUPTION’.
The truth is thus, some powerful, fierce looking and fearless people are within the Nigerian FX system with deposit money banks, the central bank of Nigeria and major players like Dangote and his likes who play a grand scheme to manipulate the official FX and interbank markets for personal gains.
Whilst there have been concerted efforts to effectively brand the FX crises as school fees and medical needs induced, a company like Dangote – for instance, has received USD108,102,608.82 (One hundred and Eight Million, One Hundred and Two Thousand, Six Hundred and Eight Dollars, Eighty Two Cents only) from the 5th of February 2016 to the 15th of March, 2016 – all these from the National Treasury with some going to ridiculous projects like expansion activities in other countries including Congo and Ghana.
On Tuesday, February 16 2016, First Bank Nigeria published its RETURNS ON UTILIZATION OF FUNDS PURCHASED FROM THE CENTRAL BANK OF NIGERIA as $25,701,921.17, Dangote Group got $10,000,001 and invested $9,174,084.67 in Congo. These FX transactions for his Congo businesses were done at official CBN FX rates even when the CBN approval to the Banks clearly state that these funds must be purchased from the interbank market only.
3 days after that Thisday Publication, Abdulsamad Rabiu, Chairman of BUA Group and Forbes 5th richest person from Nigeria, wrote an op-ed in Leadership Newspaper titled: Forex Abuse, Bane Of Economic Growth. Abdulsamad wrote that “Whilst some manufacturers are experiencing extreme difficulty sourcing foreign exchange for legitimate business operations within Nigeria, others are getting FX to set up operations in other countries”
Dangote Cement is Nigeria’s largest cement company by market capitalization with Africa’s richest man owning 92% of its shares. Dangote runs a very big business but we must all ask ourselves a simple question, should these businesses be run at our expense… at the expense of the common Nigerian? Dangote does not invest his money, he invests Nigerian money and he has gone from investing it in Nigeria to investing it abroad. And when government policies compel you and I with economic magic to buy his products at prices doubling world average price, they have stolen even more of our money and yet he only pays a net tax of just about 1% of his income. We’d rather our government lend this money to Greece and collect huge returns on investment like the EU is currently doing – not a paltry 1%.
As Nigeria’s largest cement manufacturer, Dangote Cement, owned by Africa’s richest man, Aliko Dangote continues to manipulate the FX markets in Nigeria in acts of economic sabotage, you and I will continue to pay for the consequences of inevitable hardship that will follow.
In various documents from 2013 to 2016, Dangote got special approvals entering into billions of dollars from the Central Bank of Nigeria to purchase FX from the interbank market but went ahead to bypass the approvals in connivance with some deposit money banks and accessed the official FX window instead. Accordingly, over 3 billion US dollars may have been moved through this means.
Furthermore, these documents show details of how Dangote cement had been using these special approvals to not only fund expansion programmes but also, operational activities including marketing, purchase of bags, raw materials, etc in various countries. Nigeria’s commonwealth was in effect, being used to fund both expansion and operations of Dangote Cement in other countries including Zambia, Cameroon, Congo, Ghana, etc. without any official government policy supporting those effort, whilst over here in Nigeria, companies with investments within the country were being deprived of FX for their wholly Nigerian operations.
It remains baffling that funds for these transactions were sourced from the official market despite approvals to the contrary. These transactions deprive Nigerians of their commonwealth and exposes a lack of accountability in the Forex system in Nigeria. Furthermore, whilst it may seem that these approvals were granted from 2009 – 2014, transactional records from the Banks will show that transactions were still made with some of these approvals as recent as 2015/2016 at the height of our FX crises in Nigeria. More disturbing is that these shady activities that started before the commencement of this #Change administration, has continued under this present government. We must all call on our dear president to stand up and defend the mandate of being fair in discharge of activities of the highest office in the land.
In order to achieve a thorough investigation, Nigerians need to speak out and drop the usual lazy attitude of not being ready to participate in affairs concerning our dear country, thus ask the Federal Government to compel the Central Bank to provide all approvals for expansion projects outside Nigeria by Dangote Cement and his likes, and all deposit money banks to provide information on all transactions based on these CBN special approvals – how much, when, to whom and then through which medium.
Our media have failed us most as they are being used as the tool to divert our attention from the actual crime. Our media has been heavily influenced to brand the current FX crises as school fees/medical tourism induced with ulterior desires other than their ostensible claims with the aim of making poor Nigerians suffer.
We have also failed ourselves, our silence and our disunity will achieve nothing. Nigeria belongs to all of us, it is our duty to audit those we appointed to manage our country, we cannot afford to be lazy anymore. It is high time we register our voice and make Nigeria work for our collective benefit.
God bless the Federal Republic Nigeria
For Concerned Nigerian Initiative
Editor: Opinion expressed on this page are strictly those of the author and does not necessarily reflect the views of abusidiqu.com and its associates