Have you heard that Nigeria’s foreign reserves are the highest they have been since 2014?
That is already one of the points being cited by supporters of President Muhammadu Buhari as the 2019 general elections, just 300 days, away draws near. The rise in oil prices to a three-year high has further buoyed pro-Buharists as it is expected that the nation’s economy and the value of the naira will be ‘stronger’.
But analysts do not see this turnaround as some miracle. In March, Feyi Fawehinmi, with some inside knowledge into the workings of the Central Bank, asked in a Guardian piece “What’s inside Nigeria’s foreign reserves?”. Many others have chipped in, basically affirming that the nation’s economy has been assigned an artificial value for political reasons that are ultimately rooted in bad economics.
The latest is from political economist and presidential aspirant, Kingsley Moghalu. Speaking at the Lagos studios of Nigeria Info FM, the former deputy governor connected the quest to maintain an artificial value for the naira to populism and ineffective leadership.
“Why is the pumping going on?” Mr Moghalu asked, speaking with Tunji Andrews on The Money Business and Economy Show. “Because there is a political motive to maintain a false value for the naira”.
“Instead of focusing on making the Nigerian economy productive and exporr-oriented which is the source of the strength of the economies of many other countries, we are focusing on maintaining a false exchange rate.
“Because the price of oil is doing well, the foreign exchange market is put on steroids. It’s like an athlete performing unnaturally.
“But even then, look at all of the pumping going on and the naira is depreciating. What it tells you is that there is an innate absence of confidence in the Nigerian economy and it’s management. That confidence has not been restored”
Godwin Emefiele, the CBN Governor, has faced much criticism over the past three years, leading at some point to newspaper advertorials alling for his dismissal. That has not happened, leaving him in-charge of administering the Bank through the 2016-2017 spikes in dollar-naira rates which made forex scarce, freezing any out of business.
While the naira has seemingly appreciated recently, Mr Moghalu’s assessment is that there will be a consequence to what appears to be a conscious ‘padding’ of the Naira’s value. Question marks remain over the CBN’s and President Buhari’s willingness to allow the market improve the Naira by strengthening facilities that encourage productivity.
A weak and an artificially-boosted naira affects Nigeria’s ability to perform on the international stage, even as the IMF are uncertain about Nigeria‘s ability to pay up loans due to a low revenue base and a mono-product economy.
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