This article is a Marxist intervention in the ongoing debate on whether Naira can really be saved. There have been two main trends arguing out this debate and both are clearly wrong. While one trend advocates the conversion of earned Dollars first by Central Bank to Naira before distributing it to Beneficiary, the other trend wants Central Bank not to convert the Dollar, but to issue a Dollar Certificate to the beneficiaries and the beneficiaries can now go later in the future to convert their certificate to Naira. None of these participants is right because their point of view is restricted within the confinement of Capitalism and therefore instead of seeing a real Naira, they keep analyzing a fetish Naira. We hold it a duty to Nigerian Working class, the explanation from firm Marxist point of view, at least to clear off the confusion that these Bourgeois intellectuals have been selling all these while.
Is Strong Naira desirable?
Nigeria is an import dependent country .for its manufactured goods. Manufacturing’s share of export revenues is estimated at 1 percent. By contrast, manufactured goods constituted the largest category of imports since the 80’s. Therefore, the immediate effect of a devalued Naira is inflation. It hits the middle class hardest especially those who can afford some of these imported goods. Manufacturing machines are almost 100% imported and so also are many sophisticated equipment. To crown it all, Nigeria is now a net importer of foods. Obviously, with this state of affair, a weak Naira means hell for ordinary Nigerians. It means economic stagnation, instability and general meltdown.
Why Naira’s Value is falling?
Nigeria is a mono-economy. She earns over 93% of her foreign earnings from oil exportations. When oil price is good, Nigeria is good; and prostrate when otherwise. A simple case of demand and supply of foreign currency has a serious influence on the value of currency. When oil was $147/Barrel, it was not accidental that Naira was stable and started having problems when oil price fell significantly. Over the past ten months, the apex bank had become the largest supplier of foreign exchange in the domestic market, controlling almost 90 per cent of total supply as against 10 per cent in the first quarter of the year. Other supply sources especially foreign direct and portfolio investments: home remittances (Western Union etc) have since dried up as a result of the global liquidity and credit crises. Side by side with this lean supply is ever growing demand for dollar. The Dutch Agricultural and Trading Company states that Nigeria spends $1.3 billion annually on the importation of rice. An Asian news agency recently blamed Nigeria for the 13 per cent rise in the demand for rice this year.
Nigeria spends an average of $5 billion on fuel importation annually. Besides, it spends close to $1 billion maintaining refineries that hardly refine crude oil into petroleum products. The most significant pressure on Naira has been consistently coming from Bank’s demand. On October 6, 2008 the banks bought $257.449 million, amounting to approximately four times the $60 million that the Central Bank of Nigeria (CBN) put on offer in the market for that day. On October 27 2008, the banks bought a whooping sum of $892 million which accounts to be the highest single-day demand since the introduction of the Wholesale Dutch Auction System (WDAS) in 2006.
The Wholesale Dutch Auction System (WDAS) is the window through which the CBN sells foreign exchange to end-users through the commercial banks. This demand has been majorly for speculative purposes. Banks, having lost over N 650 Billion, from stock exchange moved as usual, to speculate on the foreign exchange and this is too easy for them, since they hold significant wealth of the public in their vaults. With over $1 Trillion collective asset base of Nigerian Bank, there is hardly any Government policy that they cannot subvert. With this overwhelming wealth at their disposal, they control the life wire of our economy.
Can Currency’s supply and demand be reformed?
How did Central Bank respond to this subversive action of Nigerian Banks? Expectedly, even the Governor of Central Bank himself is a major shareholder in one of these banks, so his action is easily predictable. The Governor stepped in to strictly regulate the supply and demand of foreign currency. Can chaotic market forces of Capitalism be regulated? This is the question our learned Professor aught to have asked Himself before embarking on this blind path. Central Bank has almost completely centralized the supply side of the foreign currency, but has been consistently having problem regulating the demand side. Regulating supply can never be difficult in a mono-economy country like Nigeria, where over 93% of foreign earnings come from oil and this proceed goes straight to Central Bank. It is easier for the camel to pass through a needle eye than for demand side of the equation to be regulated. “Banks are now required to provide more details on their customers to enable us track where the forex purchased from our window is going,” an official of the central bank said, but despite this, no appreciable success has been achieved and can ever be achieved.
Only Working Class solution can work.
No appreciable control can be exercised on financial systems while still leaving the ownership in the hand of the greedy, over-bloated and highly parasitic Chief executive of the Banks. With overwhelming amount of money in their possession, they will always have their greedy way. There is little or no control you can exert on these masters of the game. There are million and one ways they can use to subvert any policy that can challenge their raw deals and fabulous profits. The only sure way of saving Naira and guarantee a healthy usage of credit at the disposal of Banks is to Nationalize the Banks. This is what Central Bank can never do while the Government is still in the hand of ruling class. Only a Working Class Government with a socialist program can boldly take this step; therefore, only a government of the Working Class can truly Save Nigeria Naira.