Suicidal Defence Of The Naira

By Henry Boyo

The awareness of the correlation between lower naira exchange rates and increasing poverty motivated the “Save the Naira, Save Nigerians!” by-line in articles in this column since 2004. Despite the obvious debilitating impact of Naira devaluation on inflation, domestic industries, employment and social welfare, the Central Bank of Nigeria (CBN), recently, brazenly   declared that it deliberately devalued the naira from below N120/$1 to almost N150/$1; regretably CBN, by this act, declared a war against our welfare.

 The apex bank however, countered that devaluation was necessary to stabilize the economy and ensure that monthly naira allocations matched the projected 2009 expenditure budget. I daresay, however, that such a fiscal strategy is counterproductive; Instructively, the resultant bloated Naira allocations will still be inadequate to cover recurrent and capital expenditure which were earlier projected with at least 25% stronger naira values.

When the folly of this strategy ultimately dawned on our monetary policy makers, the CBN Governor quickly recanted and later alleged that, the devaluation was in fact, the handiwork of speculators!!   Now, let us examine his claim. The first pertinent question is, how speculators accumulated almost N2,000bn between October and November 2008 to exchange for $7bn plus from CBN?   Indeed, prior to the alleged deliberate devaluation, the monetary authorities, reportedly held internal consultations and sought President Yar Adua and National Economic Council’s approval; inevitably, prominent Nigerians with interest in banks became consequently privy to the dastardly blow awaiting the naira!

Curiously, despite the very late budget passage in October 2008, and the parallel delay in capital projects execution, the Federal Executive Council, nonetheless, authorized 100% release of all outstanding budget provisions, not minding that with Sallah, Xmas and New Year- holidays imminent, there were barely seven weeks left to 31st December 2008 to complete projects which should normally take 12 months for implementation.

Invariably, with the subsisting embarrassingly surplus Naira Liquidity, and the open secret of an imminent Naria devaluation, the banks besieged CBN with demands for unusually large dollar purchases, which they would later sell with huge profit after devaluation.