In an interview with NIKE POPOOLA, the President, Association of Bureaux de Change Operators of Nigeria, Alhaji Aminu Gwadabe, speaks on foreign exchange challenges and solutions, among other issues.
Naira value has fallen significantly at the official and parallel markets. What is responsible for this?
You know, in every operation in each market, there is a season. So, this is a season of Naira attrition in retrospect. Election year comes with pressure on that Naira, which is why we have seen that premium exists between the official and the unofficial markets. On a fundamental basis, you know, this is just like a symptom, not the cause. But partly, you know in Nigeria, there are very many factors that really put structural disequilibrium in the foreign exchange market. Nigeria is a monoculture economy. It is a one-product economy, where the productive activity is very, very low. This is coupled with poor infrastructure and capabilities. This impacts the currency, the foreign reserves too. When you have a source of foreign reserves that is not diversified, tell me how the reserves will not fall? How will they be so strong to actually stand any pressure on the Naira?
In terms of oil revenue, oil is going up but why should our local currency be this way?
The reason is that we are import-dependent. So, as we gain inflows of Dollars, we lose in outflows of Naira. You see, at the end of the day, we are back to square one. That is why we are not seeing any impact. So, this is a very fundamental crisis. There is the argument that it is already a boom or a doom. We are not making any development out of it. It just gives room for stealing or corruption. That is just what it has resulted in. It has not resulted in any meaningful development.
What can be done to boost forex inflows?
We have put agriculture at the back-end. This is the economy that was surviving on agriculture during the colonial masters. Most of the bridges built in Lagos were from the proceeds of agriculture. We have lost that focus; we have lost that trajectory. So, it is very, very difficult for the naira to be strong. The quality of our export is very poor. Our balance of payments is in trade deficit. Our export commodities are low quality; our earnings are from one source. So, tell me, which currency will be stronger in this? All the parameters that will make it stronger are negative. Are the reserves so big to accommodate any shock? They are not. So, the market is being monopolised by just a constituency. There are many ways we can generate this dollar revenue if we can liberalise. So, that is about why we are seeing this pressure on the Naira. Anything we use in this country is imported.
What is the effect of speculators’ activities on the Naira value?
Once speculators know that you do not have that arsenal to defend the local currency, they will continue to speculate. So, this is where speculation will also come in, and speculation is not a good behaviour on the strength of the Naira. Because of this fundamental disequilibrium, there is a wider premium. There is no patriotism in capitalism. You cannot tell me to sell my money at N416 when somebody will buy from me at N600, even if you put a fence. So, this is the thing. The economy is suffering. People are hoarding. Confidence is being lost. People are losing confidence on the value of the naira because of depreciation, nobody wants to keep naira. Before you know it, inflation is about 16.5 per cent and the naira is losing value. So, the best thing any rational human being will do is to do currency subscription. We are seeing speculation; we are seeing hoarding. You do not need money now, but you are scared that if you do not buy now, in the next six months, it may be N800. So, this is the issue.