By Suleiman Umaru
It is no longer news that Asiwaju Bola Ahmed Tinubu, a former governor of Lagos state and now President of the Federal Republic of Nigeria and Commander-In-Chief, C-In-C, of the Armed Forces, has promised to tackle headlong oil subsidy and multiple exchange rates, implemented by the erstwhile Muhammadu Buhari’s Administration that had had stagnated the economy within the last eight years.
The Lagos state born Nigerian President was said to have directed the Central Bank of Nigeria, CBN,Godwin Emefiele, to streamline the country’s multiple exchange rate policy . The Nigerian President may have used the opportunity of the meeting with the All Progressive, APC, governors at the villa, on Friday, June 2, 2023, to restate that ‘’the decision foretell good intentions for the economy’’. He was emphatic. ‘’We will not have ‘’multiple exchange rates anymore’’.
Note that in a multiple exchange rate system, there both fixed and floating exchange rates in the market. According to a CBN, source, the market is divided into many segments, each with its own foreign exchange rate, whether fixed or floating. It was not surprising why importers of certain goods essential to the economy were made to have different exchange rate while importers of non-essential or luxury goods were made to have discouraging exchange rate.
There are indications that ever since the former Lagos state governor volunteered information to streamline the country’s foreign exchange market, the Nigerian Currency, the naira, ppears to have appreciated significantly at the black market. This is evident as the naira which exchanges at N770.00 to one North American country of the United States, US, dollar was said to have dropped, to N757, at the parallel market. Until Tinubu’s Administration took the bold initiative to streamline the country’s forex market, the gap between the official exchange and the black market rates of the US, dollar to the naira was a little above N300.00.
Mohammad Sanusi, a former governor of CBN, and the deposed Emir of the ancient town of Kano, by Abdullahi Gandunje, the immediate past governor of Kano state had said what this means if someone can get $100,000, at the official exchange rate market and round trip it , you make a profit of N30 million. He further stressed that if the person gets a million dollars, at the official market and sell at the parallel market, you can make a profit of N300million without doing anything.
An ggrieved Sanusi had said that there is no country in the world where the government create this kind of opportunity for rent seeking and you expect people not to take advantage of the rent and make Hcheap money and you are asking them not arbitrage. ‘’I know something that I can get for N400.00 and sell a N700.00,and should not arbitrage . Appearing on the Channels Television recently, the no nonsense former CBN, governor, had said that there is no way the government can create such opportunity for people and ask them not to arbitrage.
The former CBN , governor had repeatedly said that the problem of Nigeria is of the government making but nobody s to have listened to him. It was not surprising why the erstwhil CBN, governor had reapeatedly said that that the problem of the country is of our own making. He was emphatic that there is no way that the government through the apex bank would be selling the US, dollar, at below the market rate and not expect arbitrage and graft.
He has lamented that that is why a small number of people become multi-billionaires overnight for doing anything but arbitraging foreign exchange. He had said that ‘’it is the same thing that happened in the oil sector with the oil subsidies.
The deposed Emir of Kano , who had repeatedly unbarred his mind since 20211 and now, had said that the problem of the country is the multiple foreign exchange rate and the subsidies free-for all, describing as the major sources of revenue leakages in the country and which must be blocked by the incumbent President Tinubu.
Even the Nigerian Economic Summit Group, NESG, was said to have asked the CBN, ‘’to address the challenge of the multiple exchange rate windows in August 2022 as a way to improve the inflow of foreign investment and diaspora remittances .The Group had said that the multiple exchange rate windows being implemented by the Buhari’s Administration creates room for’’ speculation, round-tripping, cronyism, and outright graft’’, confirming what Sanusi, a former CBN, governor had said. The NEG, was said to have made it clear to the CBN, Authorities that there is no better time to harmionize the country’s multiple foreign exchange markets than now but that was how far it could go.
The International Monetary Fund, IMF, and the World Bank, were said to have long advocated that the counry’s forex be streamlined and oil subsidy to free funds for infrastructural development of the country. But former Buhari’s Administration had turned a deaf ear to such appeals and had continued the implementation of the revenue draining policies.
The pressure of the IMF and the World Bank including other Financial Institutions on the Nigerian government to jettison its multiple foreign exchange rate system and maintain a single exchange policy was so pronounced in 2022, that that Emefiele , was said to have responded that ‘’the country cannot afford to operate a floated exchange rate system’’.
The Nigerian apex bank governor was said to have made it clear to David Malpas, the then President of the World Bank, , IMF and the World Bank, that different countries were facing diverse economic challenges and thus, must develop a framework peculiar to their economic situation and not tell Nigeria to jettison the multiple exchange rate policy.
Emefiele may have had his reason for insisting that the country will not jettison the multiple exchange rate policy on the ground that if it is freely floated , it will have some impact on the exchange rate itself as it will have some uncontrollable spiral effect in the country’s exchange rate’’. The question on the lips of most people was: Will he still maintain the position now that the President has asked him to go back to the drawing board and come out with a single exchange rate for the country. Your guess is as good as mine.
Financial analysts had said that there was nothing wrong with the multiple exchange policy, describing it as transitional in nature and used to alleviate excess pressure on foreign reserves when a shock hits a country’s country and causes investors to panic and pull out. They noted that it is also a way ‘’to subdue inflation and importers’ demand for foreign currency’’.
They further stated that ‘’it is a mechanism by which governments, can quickly implement control over foreign exchange transactions. But economists had said that it can lead ‘’to economic rents’’, confirming what Sanusi, the deposed Emir of Kano had said.
President Tinubu, who had said that government is a continuum and that he has’’ inherited the assets and liabilities’’ of the previous Administration but would not complain, may not have wanted to make the same misstate like former President Buhari, as he may have refused to give room to the rent seekers in the system or and loses in foreign exchange transactions, by urging the CBN, to unify the multiple exchange rate policy. This may have informed why the apex Bank printed more money during the then Buhari Administration to make up for the loses in foreign exchange transactions and the resultant effect was the rise in inflation in the economy.
There are four major exchange rate systems that have been recommended by the World Bank that that could be implemented by any country. They are the freely floating, the fixed rate , pegged float also known as adjustable peg, crawling peg, basket peg or target zone or bands and managed float rate but the two most common types implement by countries are the fixed rate regime and the floating rate regime.
Given that the Trade Union Congress , TUC and the Nigerian Labour Congress, NLC, opposed to the removal of the oil subsidy by the Tinubu’s Administration has threatened to mobilize members on Wednesday , June 7, 2023, to protest against the government economic policy, Vice President Kashim Shettima, who incidentally was a former governor of Borno state , was said to have called on the governors, ‘’to rally around the President as he tackles the challenges facing the economy like the vexed issue of oil subsidy and multiple exchange rates to free resources for development of the states’’.
Senator Hope Uzodinma, governor of Imo state and Chairman of the APC, governors Forum, who may have spoken the mind of the governors at a recent meeting with the President at the villa , was said’’ to have pledged their loyalty and support to the former Lagos state at this trying time of the country’’.
Even Seyi Makinde, governor of Oyo state, on the platform of the Opposition People Democratic Party, PDP, who was said to have accompanied Nyensom Wike, immediate past governor of Rivers and James Ibori, a one-time governor of Delta state, on a recent visit to the Villa, to see the President may not have seen anything wrong with the subsidy removal or planned streamlining of the foreign exchange market, but has asked Nigerians ‘’to support the implementation’’.
Notwithstanding the overwhelming support which President Tinubu currently enjoys from the ruling APC governors, over the reversal of the removal of subsidy and proposed unification of the country’s multiple exchange rate policy, Femi Falana, a Senior Advocate of Nigeria, SAN, had said that Mele Kolo Kyari, controlled Nigerian National Petroleum Corporation , NNPC, now baptized Nigerian National Petroleum Corporation, NNPCL, with the passage of the Petroleum Industry Bill , PIB, by the National Assembly which has been signed into Law by the former Katsina state born Nigerian President, in August, 2021, has no powers ‘’ to increase the pump price of fuel but the President’’.
The Legal Luminary noted that ‘’since the current government is yet to appoint a minister of Petroleum Resources, such responsibility of fixing the pump price of fuel rests squarely on the President’’. He asserted that NNPC, which has metamorphosed into a Limited Liability Company, as NNPC limited, is like Total, EXXON- Mobil, and Shell Petroleum Development Company, SPDC, operating in the nation’s oil industry, and therefore , cannot announce an increase in the prices of petroleum products, insisting the power is invested on the government.
The Lagos based SAN, who could not hide his feelings would want Tinubu, to take advantage of the NLC’S ultimatum to embark on strike over the hike in petrol prices by NNPCL, ‘’to review his position on the delicate matter’’.
Recall that NNPCL, in the wake of President Tinubu’s Administration’s declaration that subsidy payment ha has ended during his inauaguration on May 29, 2023, at Abuja, the Federal Capital Territory, FCT, had reviewed its pump price for petrol from about N165.00 to over N500.00.
Aware that the planned protest by the organised labour next Wednesday, over the removal of the oil subsidy and the subsequent hike in petrol price may not tell good of the new Administration may have informed why the government has initiated talks with the Leadership of Labour, to see reason for the removal of the subsidy and the steps so far taken to cushion the adverse effect on the workers and Nigerians in general. How that would persuade the organised Labour to sheath their sword remain to be seen.