Our monetary policy experts and economists told us that government should devalue naira, float the currency, let market forces determine true value, the value of a currency is what the market is willing to pay and all those cliches.
Some wrote articles upon articles, appeared on TV and took over Radio airtime lampooning Buhari and the Central Bank Governor. How they are sending investors away. Investors wont bring their dollars when exchange rate is artificially controlled.
One even said the President’s economic policy is driven by command and control, a euphemism for telling the President of having military hangover.
Pheeeew! Naira was floated or was it devalued and the experts celebrated that they have won. They even predicted that after the intial spike it will settle at N250 to $1. The gap between parallel market and Bank rates will disappear. We all shouted for joy. We have a new elixir in currency floating. Our troubles are gone. Even the CBN Governor put his blood on it in a memo to the President that it will be N250 to a dollar after all said and done. It is now getting worse. It is now N400 to a dollar.
Trust the experts. They have a new argument. It was because Buhari didn’t act on time. The currency should have been devalued from his first day in office. The cancer has spread before he acted. They forgot to say that the currency was devalued by 35 per cent March last year after a previous devaluation 4 months before.
Those who argued that devaluing naira wont guarantee any inflow from investors were shouted down as Economic illiterates. Who will listen to them. They didn’t go to Harvard and they never worked with World Bank.
Let the price of crude go up today to just 70 dollar per barell and we can pump at least 2million barrels per day which is even less than our OPEC quota of 2.3m barrels per day dollar will crash because CBN will have more dollar receipts than current demand.
The recent tomatoes crisis best explains it. A pest disease affected tomatoes supply for few months and the whole country exploded. A basket of tomatoes went from less than N1000 to N45,000. Today, same basket of tomatoes is back to N800 and within the next few days tomatoes will be wasting away when we have over supply.
Thank God for Dangote and Erisco Food tomatoes paste factories, that can at least help the farmers not to labour in vain.
No economic magic will bring down dollar rates until government can generate enough dollar receipts through exports.
It is a simple as that. It doesn’t require space science knowledge to know.