USA Africa Dialogue Series - Fwd: On the Unnecessariness to Panic by the Buhari Administration {Re: Buhari Bows To IMF Pressure, To Devalue Naira 290 - The Road to Golgotha!

Tony Ashiekwene, Imperial and My People:

I concur with both of you.....devaluation without addressing the fundamental problems for the very devaluation will lead to more devaluation - and no one has addressed HOW the devaluation itself ADDRESSES the fundamental problems.

The other fact of the matter is that both DEVALUATION and FUEL PRICE INCREASE tremendously INCREASE the cost of governance in a Nigeria where OFFICIAL ENTITLEMENTS coupled with PROFLIGACY are the order of the day - unless these are curbed through ENFORCED DISCIPLINE by government itself.  For example, with fuel price increase, ALL those OFFICIAL CARS that you see on the road - for Ministers, PermSecs, Directors, VCs, Military, etc. - will have INCREASED fuel bills;  in one estimate, fueling of official cars in Nigeria normally takes ONE-THIRD of ALL fuel charges in the country; add profligacy and outright theft can push that percentage up.  Travel abroad (for official duties, training, etc._) and  Importation of goods (cars, military equipment, etc.) for OFFICIAL duties will INCREASE in cost due to any devaluation.....

It will be the case of the dog chasing its tail.

The PMB administration must NOT be panicked into doing the same thing over and over again and expecting a different result - and it is already showing some sign of such panicking.  Some PAIN must be absorbed while the FUNDAMENTAL reasons for both devaluation, fuel price increase, etc. are addressed -  namely

   1.  MONOCULTURAL DEPENDENCE on raw materials - of which oil is merely the main example - which makes 

        the country vulnerable to the vagaries of international price fluctuations and raw material substitution

   2.  LACK OF DOMESTIC PRODUCTION of essential goods, which drains foreign reserves

   3.  EASE OF INSTITUTIONAL CORRUPTION, which distorts income distribution in the country

   4.  OFFICIAL ENTITLEMENT and PROFLIGACY at all governing levels, which distorts budgetary allocations in favor of recurrent expenditures rather than capital ones.

    5.  INSECURITY - Boko Haram, Niger-Delta Militancy, kidnappings, etc.

    6.  OVER-CENTRALIZED GOVERNANCE - the Federal dominating the states, and the states dominating the local government, leading to a violation of the principle of "subsidiarity" , which means that nothing should be done by a larger and more complex organization which can be done as well by a smaller and simpler organization. In other words, any activity which can be performed by a more decentralized entity should be. This principle  limits big government and enlarges personal freedom.  

Clearly, the PMB should work towards:

    1.  DIVERSIFICATION, which it has committed itself to (in agricultura, solid minerals, culture and tourism, etc.)

    2.  IMPORT SUBSTITUTION, which is obtained through LOCAL INDUSTRIALIZATION

    3.  TIGHTENING OF FINANCIAL OVERSIGHT of PUBLIC FINANCE, which it has begun with introduction of 

         TSA/IPPIS/GIFMIS/BVN, etc.

    4.  OFFICIAL DISCIPLINE, which it has begun with its first budget

    5.  ENSURING SECURITY, which effort so far has yielded some fruits.  

    6.  TRUE FEDERALISM, to which it should move towards faster in consonance with its manifesto.

It should not expect that IMPACTS will be felt in six months or one year, until the IMPACT of its first budget starts being felt.

This PMB administration must not PANIC.

And there you have it.

Bolaji Aluko

On Sat, May 14, 2016 at 8:08 AM, Imperial <imperial_ltd@yahoo.com> wrote:

Alagba Mazi Tony Ishiekewene 

I concur .

If the economic fundamentals that led to initial devaluation aren't well addressed, all should bear it in mind  that there isn't an end to the exercise.so what's the point ? 

Sent from my iPad

On 14 May 2016, at 07:58, Tony Ishiekwene <tonykwene@aol.com> wrote:

I can't understand what Joe Attueyi is gloating about! That the Nigerian economy undergoes another series of official and unofficial devaluations- because it won't end with this one, if your speculation comes true-devaluations that will create more uncertainty and instability leading to more poverty, misery and this time untimely death of Nigerians is what you are jubilating about- the route to Golgotha?

I have continued to preach no more devaluation, based on sound Economics- practice and history of Nigeria's devastating effect of the policy. If the silly thought- because you are all still just "speculating"- is carried out, then watch the Parallel market rates jump or fly up above the current level, and you "pseudo- Economists" and interested parties will wail again about the wide gap and call for more devaluation- the lazy, thoughtless and unworkable option for Nigeria. I have asked you lots what benefits the Nigerian economy derived from the 20-30 previous devaluations since the misadventure started in 1986 and you have, with your colleague, been speaking in tongues, from both sides of your mouth or craftily avoiding answering the question(s). Your health sector is almost comatose and the Educational system in doldrums because decent Doctors and Professors have long taken flight from Nigeria to other better managed economies causing massive brain drain and the wipe out of the middle class.

What will happen is that the government will officially recognize a "Dual Exchange rate" system, where essential raw materials and equipments for manufacturers and Farmers will be sourced at the Official rate and other non-essentials, including School fees and Health tourism Nigerians can go look for over-glorified Dollar elsewhere ( unofficial market(s) ) to meet their private needs. This is not novel; we once had a "Second tier" foreign exchange market during the Babangida days and it remained so with different nomenclature, because the Official rate cannot satisfy the wad of Nigerians wanting FX for their gallivanting and frivolous needs. There has never been enough supply of Fx, not even when Oil sold for $120 a barrel did we not have a second, unofficial market for FX. But all of these devaluations  are just "hitting a Truck loaded with Gravel," you will only be hurting your hand or body without making any dent on the Truck.

For me having tried the route of Devaluation (Demand management side of the equation) for so long and it has not worked, something more drastic needed to be done- and that relates to the "Supply management" side of the market for foreign exchange). Diversify, we have been saying this since 1982, Get into more production and productivity, including in Agriculture, Solid minerals and manufacturing. I can't see why with so many universities, Polytechnics and a swam of 180 million people we cannot clone basic technological and industrial goods from the West and Far East. That's how countries like Japan and China started- they first shut out their economies to foreign trade, and that's what I suggest Nigeria should do now- and today when the sneeze America and Britain freezes.

The government is between the Rock and the hard place. They are doomed if they do and they are doomed if they don't. The scorched earth raiding of the treasury by the 40 PDP thieves, of the last administration under the supervision of GEJ and NOI; the drastic fall in the price of Oil, the main foreign exchange earner for the country; and now the vandalisation of Pipelines and more threats of shutting Oil production means the government's reflation Budget 2016 is under serious threat. There are a lot of sabotage going on by the "Wailing group" and they all want Buhari to fail because he dared kick out the thieves and is working to make them pay for their sins against Nigeria. There is no let up for him. It is raining on him already but these guys want it to pour and they have the stolen resources hidden away to make it pour on Buhari!

The endless devaluation cycle will effectively turn the Naira into the shut Zimbabwean Dollar type of worthless currency. Those on fixed income, the unemployed and even some commodity goods and food retailers, like "Mama put" will suffer a deteriorating standard of living worst than the poverty levels they are currently battling.Any African country leader that still thinks IMF has anything good to offer them need their heads examined!

Tony Ishiekwene

"The truth shall set you free"


-----Original Message-----
From: Joe Attueyi <topcrestt@yahoo.com>
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Sent: Fri, May 13, 2016 10:44 PM
Subject: Buhari Bows To IMF Pressure, To Devalue Naira 290 To Dollar | Sahara Reporters

Folks, I have now become PMB's economic guru. After one year of wailing to him to do the right thing. 

I think folks like my friend Tony Ishiekwene and Imperial Ltd should, going forward, first find out my views on economic issues and then toe my line before running commentary on economic matters. Hehehehe!

Kudos to PMB. 

Better late than never.  I will soon tear my wailers card and join the Buharideens!

Joe

http://saharareporters.com/2016/05/13/buhari-bows-imf-pressure-devalue-naira-290-dollar

Buhari Bows To IMF Pressure, To Devalue Naira 290 To Dollar

After months of insisting that he had no plans to devalue the naira, President Muhammadu Buhari has caved to pressure to change course; SaharaReporters has learned from an exclusive briefing by a few top aides of the president.

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BY SAHARAREPORTERS, NEW YORKMAY 13, 2016

After months of insisting that he had no plans to devalue the naira, President Muhammadu Buhari has caved to pressure to change course; SaharaReporters has learned from an exclusive briefing by a few top aides of the president.

A day after the Buhari administration increased the price of the pump price of fuel by 67%, from N86.5 to N145 a liter, our sources disclosed that Mr. Buhari has also agreed to demands by the International Monetary Fund (IMF) that he significantly devalues the Nigerian currency. Our sources indicated that the naira would be pegged at N290 to one dollar. The current official rate is about N200 to a dollar.

Our sources said Mr. Buhari and his economic team took the decision to accept the IMF's terms for funds that the Nigerian government wants to access to bridge a critical shortfall in revenue occasioned by a drastic decline in oil revenues. An administration insider told SaharaReporters that Nigeria could receive as much as $3 billion in credit facilities from the IMF.

"The truth is that Nigeria cannot operate without sourcing credit from the IMF," said one of our sources, an economic adviser to Mr. Buhari, who spoke on condition of anonymity. "And the IMF was adamant that we must devalue before they can discuss extending credit to us," he added.

Curiously, administration officials took the decision to devalue the naira without the input of the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, another source revealed. An official of the CBN confirmed to Saharareporters that bank executives were kept in the dark about the discussions that led to the Buhari administration's decision to devalue the naira. "Some of us here [the CBN] are not opposed to devaluation, given our country's present circumstances," the source said, adding that it was the CBN's function to pilot Nigeria's monetary policies.

One of our sources pointed to the fact that the naira has been weakened in the parallel market, where it now sells at N360 per dollar. "The government cannot continue to operate under the illusion that the naira is stronger than it is. The only problem is that we did not start early enough to admit to Nigerians how bad the financial outlook was," the source added.

The Nigerian economy has been pummeled by falling oil earnings that have led to a near collapse of the economy. The IMF had long indicated its readiness to support Nigeria's economy with credit liquidity but insisted on Nigeria devaluing its currency. President Buhari had insisted on numerous occasions, before and after his election, that he would never devalue the naira.

It is unclear how Mr. Buhari and members of his economic team plan to justify the about-turn on devaluation and other policy somersaults. After initially vowing to reduce the price of fuel, the government yesterday announced a significant hike in fuel price. The administration also set to announce a 10% increase in value-added tax (VAT), another indication that the Buhari government was embracing the kind of liberalization pushed by the IMF.

To compound dwindling oil prices, militants in the oil-rich Niger Delta region have crippled oil exports substantially after bombing oil pipelines and issuing threats to oil companies to leave the region.

Last week, several oil companies evacuated essential staff from the region's offshore platform leading to a reduction in daily oil outputs from 2.2 million barrels a day to 1.3 million barrels a day.

Sent from my iPhone

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