How foreign currency hawkers became victims of Lagarde’s visit
By ISAAC ANUMIHE
The Managing Director of the International Monetary Fund
(IMF), Ms. Christine Lagarde came to Nigeria on January 4 to begin a
three-day working visit.
Her white private jet with registration
number ZS PNP touched down on Nigerian soil at 2.44pm at the
Presidential Wing of the Nnamdi Azikiwe International Airport and she
was quickly ferried out of the place in a convoy resemblance of any
visiting president to Transcorp Hotel from where she was taken to the
villa where a banquet was lavishly organized for her.
In her convoy were the Governor of
Central Bank of Nigeria (CBN), Mr. Godwin Emefiele and the Minister for
Finance, Mrs. Kemi Adeosun, as well as foreign investors who intend to
invest in Nigeria.
Her visit to Nigeria provided an opportunity of strengthening the Fund’s partnership with the largest economy in Africa.
During her visit, she met with President Muhammadu Buhari and other senior leaders, along with business leaders, prominent women, and representatives of the civil society. She also met with legislators and had a get-together with children in the orphanage home where she donated, on behalf of IMF, a cheque of N1.5 million.
During her visit, she met with President Muhammadu Buhari and other senior leaders, along with business leaders, prominent women, and representatives of the civil society. She also met with legislators and had a get-together with children in the orphanage home where she donated, on behalf of IMF, a cheque of N1.5 million.
Lagarde said ahead of her trip: “Nigeria
is working hard to improve its business environment, promote
opportunities for growth in the private sector, and strengthen social
cohesion, all areas where the government has an important role to play.”
\The IMF helmswoman who left Nigeria for
Cameroon on January 9 where she was expected to hold talks with
President Paul Biya and his economic team, as well as private sector
executives, women leaders, and other members of Cameroonian society,
rated Nigeria’s economy high and emphasized that Nigeria, in spite of
its economic quagmire, needs not borrow if its revenues are properly
harnessed.
She spoke against any attempt to devalue
the naira adding that the government should put solid economic measures
in place to strengthen the financial sector and to channel more
resources to grow the real sector of the economy and the Small and
Medium Scale Enterprises (SMEs).
Lagarde disclosed that the IMF has had
series of meetings with the representatives of the banking industry and
came out with strategic mechanism of sustaining the Nigerian banking
sector.
“This morning I have been with the CBN
governor. I have also been having series of meetings with the
representatives of the banking industry and we have assured ourselves of
a strategic defence on how to sustain the banking sector. We also have
discussed how the financial sector can help contribute in financing the
economy and support small and medium scale business and the development
in Nigeria,” she coached.
But she advised strongly against the
activities of the Bureau de Change (BDC) market in Nigeria saying that
they should be improved upon.
Kill the BDCs
Two days after Lagarde left, Nigeria
implemented the advice. So, on January 11, the CBN came hard on the
BDCs, refusing to fund them and allowing them to source their funds from
autonomous sources. This has put a serious strain on the market with
some of them closing down.
According to the CBN Governor, the BDC
owners engage in multiple illegal buying of foreign currencies from the
CBN, so placing a serious burden on the bank.
“More disturbing, though, is the financial burden being
placed on the Bank and our limited foreign exchange. The CBN sells
US$60,000 to each BDC per week. This amount translates to US$167 million
per week, and about US$8.6 billion per year. In order to curtail this
reserve depletion, we have reduced the amount of weekly sales to
US$10,000 per BDC, which translates into US$28.4 million depletion of
the foreign reserve per week and US$1.476 billion per annum. This is a
huge hemorrhage on our scarce foreign exchange reserves, and cannot
continue especially because we are also concerned that BDCs have become
conduit for illicit trade and financial flows.
“The Bank would henceforth discontinue its sales of
foreign exchange to BDCs. Operators in this segment of the market would
now need to source their foreign exchange from autonomous source. They
must, however, note that the CBN would deploy more resources to
monitoring these sources to ensure that no operator is in violation of
our anti-money laundering laws,” he fumed.
IMF owes us more -Enwegbara
Since Lagarde left Nigeria, a lot of
economic policies have been made and the financial sector has been hard
hit, a situation that has attracted so many criticisms.
A development economist, Mr. Odilim
Enwegbara, said: “Maybe the IMF can help us fast-track the
identification and repatriation of our stolen fund hidden overseas.
Since the credit power has moved from the
Wall Street banks to now Chinese government controlled banks, the power
to dictate that was earlier fully controlled by the IMF acting on
behalf of western lenders’ interests is now in Chinese hands.
This truth is being reinforced by the
emergence of the China-led Asian Infrastructure Investment Bank (AIIB),
which currently has over 57 members including South Africa as the only
African member.
Since this is where the future of infrastructure financing lies, it is highly advisable that Buhari administration begins to give Nigeria’s membership of AIIB the serious consideration it needs.
Since this is where the future of infrastructure financing lies, it is highly advisable that Buhari administration begins to give Nigeria’s membership of AIIB the serious consideration it needs.
The China swing
Without expecting IMF loans, the Fund’s
assessments of Nigeria’s will only remain mostly neutral while its
advise to our government will never be mandatory.
Countries like China where most of the
borrowings by the Nigerian government will take place already have their
own independent assessment tools as well as lending conditions quite
different from IMF’s.
China, for example, is almost always
interested in–and insistent on–loans having projects attached to them,
projects that are wholly or a major portion executed by Chinese firms.
With our debt-to-GDP ratio at about 12%, against our
peers’ more than 60%, we are so creditworthy that we can comfortably
borrow as high as $270b during the next four years without being debt
trapped so long as going forward all our debts are project-driven,
particularly infrastructure based loans that by reducing our current
infrastructure deficit, reduces the present high cost of doing business
and high interest rate causing high arbitrage.
Regarding IMF’s promised technical
support, I strongly believe that Nigeria has all the technical expertise
in the country to address all our current economic challenges,
including the ongoing efforts to block leakages in revenue and wastages
in expenditure.
Because we are modernizing tax policies
to increase its coverage in ways that increase this year’s tax-to-budget
ratio, I think, since it isn’t a rocket science, we can have no need
for foreign hands, especially the IMF, which has never run any economy,
not to mention ones like ours.
That explains why I strongly believe that we do not have
the kind of luxury of time to begin this kind of having to wait for
ready-made solutions that even if have worked elsewhere may not
necessarily work for us given our economic and cultural differences. Of
course, these so-called western technocrats should be the least to have
understanding of our complex economic realities.
Best solution
Home grown solutions, as far as I am concerned, are always better because not only they enjoy a lot of wider national input but of course by enjoying wider acceptance and easily and better implemented by learning from field mistakes helps constant fine-tuning.
Home grown solutions, as far as I am concerned, are always better because not only they enjoy a lot of wider national input but of course by enjoying wider acceptance and easily and better implemented by learning from field mistakes helps constant fine-tuning.
President Buhari made us proud not only
the way he well received the IMF boss but also for making it clear to
her that should we need the Fund’s help in dealing with our
macroeconomic challenges, definitely we would be the ones contacting
them. But that as it stands, we have what it takes to address our
present problems.
Where I think her advice was misleading
is her insistence that Nigeria should not borrow again. I was instead
expecting her to insist on government justifying borrowing by borrowing
purely for investment rather than for consumption driven by big
government which was rampantly the case during the Jonathan
administrations when Nigeria was running year-in-year-out fiscal
austerity while maintaining bloated recurrent spending.
Lagarde should appreciate us
Therefore, I was expecting Ms. Lagarde to applaude the Buhari administration for its bold efforts to drastically increase investment in capital projects, which he couldn’t do without having to borrow. Even though a lawyer not an economist, her experience as someone who as a former French minister of finance would have guided her advice in a way to agree that there’s no other way Nigeria should expect to solve huge infrastructure deficit head-on than to engage in massive borrowing, especially at a time when it’s main source of revenue, oil, is witnessing unprecedented plunge.
Or isn’t it hypocritical of her to be advising us not to borrow given our debt-to-GDP ratio which at about 12 per cent is by far the lowest among our peers? Or, why are the rich nations also the most indebted nations in the world? In other words, how many times has she advised against Japan’s debt-to-GDP ratio which currently stands at 224%, Italy’s at 128.50%, US’s at 107%, France’s at 95%, UK’s at 89.80%? What about Nigeria’s peer countries like South Africa with debt-to-GDP at about 44%, India’s 66.10%, Brazil’s 60.8%, Kenya’s 50%, Ghana’s 67.50%, and so it goes?
Is she fair to Nigeria that with its over $350billion infrastructure deficit it is okay for us to remain in a league of nations with some of lowest debt-to-GDP ratios like Algeria’s 8%, Kuwait’s 7%, Afghanistan’s 6.6%, Libya’s 6.10%, Saudi Arabia’s 1.60%, etc?
Notwithstanding her hypocrisy on debt, I liked how she carried herself and particularly her expression of immense trust in the Buhari administration and by making it clear that Nigeria does not need any money from the Fund given the ongoing restructuring and reengineering of the Nigeria’s economy taking place right now”
Therefore, I was expecting Ms. Lagarde to applaude the Buhari administration for its bold efforts to drastically increase investment in capital projects, which he couldn’t do without having to borrow. Even though a lawyer not an economist, her experience as someone who as a former French minister of finance would have guided her advice in a way to agree that there’s no other way Nigeria should expect to solve huge infrastructure deficit head-on than to engage in massive borrowing, especially at a time when it’s main source of revenue, oil, is witnessing unprecedented plunge.
Or isn’t it hypocritical of her to be advising us not to borrow given our debt-to-GDP ratio which at about 12 per cent is by far the lowest among our peers? Or, why are the rich nations also the most indebted nations in the world? In other words, how many times has she advised against Japan’s debt-to-GDP ratio which currently stands at 224%, Italy’s at 128.50%, US’s at 107%, France’s at 95%, UK’s at 89.80%? What about Nigeria’s peer countries like South Africa with debt-to-GDP at about 44%, India’s 66.10%, Brazil’s 60.8%, Kenya’s 50%, Ghana’s 67.50%, and so it goes?
Is she fair to Nigeria that with its over $350billion infrastructure deficit it is okay for us to remain in a league of nations with some of lowest debt-to-GDP ratios like Algeria’s 8%, Kuwait’s 7%, Afghanistan’s 6.6%, Libya’s 6.10%, Saudi Arabia’s 1.60%, etc?
Notwithstanding her hypocrisy on debt, I liked how she carried herself and particularly her expression of immense trust in the Buhari administration and by making it clear that Nigeria does not need any money from the Fund given the ongoing restructuring and reengineering of the Nigeria’s economy taking place right now”
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