Henry Boyo

Thirdly, the regular auctions of rations of dollars by CBN in a market with too much naira has inadvertently battered and sealed the fate of the Naira exchange rate. Clearly, if the statutory custodian of the Naira is busy auctioning the dollar against the naira, what do they expect? The process of auctioning dollars in a market that is suffocated with naira is clearly a deliberate attempt to weaken the Naira exchange rate. So with inappropriately high inflation and interest rates and an ever sliding Naira, the economy will invariably remain in reverse gear. There is no successful economy that sustains inflation and cost of funds as high as 20%! So, if you ignore or deny the relevance of sustaining these indices at best practice levels, you are only postponing the evil day, and this early realization in 2004 guided the choice of the slogan, ‘SAVE THE NAIRA, SAVE NIGERIANS!’ as the byline for my articles, in the Vanguard Newspapers till date.

Historically, you will find that poverty, industrial collapse, brain drain, youth migration from Nigeria began and gathered momentum as the naira depreciated in value since 1985. The naira at a stage exchanged for N1 to $2, even when crude oil price was $12 per barrel, but this clearly did not induce the kind of calamities we have now.

What do you advise the government to do right in this regard?

Very simple. You see once you have defined the problem, the solution is in progress. Quite clearly, inflation must be kept at between 1-3%, if not, pensioners can’t confidently look forward to life in retirement. It is necessary to interrogate the cause of inflation, you know the factor that drives inflation is too much money, but as a curious professional member of the Media, you should also ask if there is scarcity of loanable funds to SMES, why is it that every week, the CBN keeps mopping up excess money from the system? You must proceed to interrogate the unyielding cause of so much money in the system, because if you can eliminate the cause(s), the price level will stabilize at industrially supportive levels; interest rate will fall, Naira exchange rate will also be stronger.

Why is it that for years there is no money to pay salaries, there is no money for infrastructure, and there is no money to pay our debts and yet CBN continuously mops up excess money that is simply sterilized from use. The troubling question therefore is where all that money leaks from to persistently compel CBN’s need to pay interest to sterilise the reportedly burdensome excess Naira supply. It is evident that the CBN does not distribute the dollars earned from crude export, instead the CBN recreates what it construes as naira equivalent at its own unilaterally determined exchange rate before Naira allocations to the 3 tiers of government. When distributable dollar revenue is substituted with Naira allocations to the three tiers of government, what do you think will happen, the bloated Naira sums expand the liquidity base to sustain an inflationary spiral, and instigate further CBN mop up of excess liquidity.

When CBN constantly mops up money, and it makes it difficult for banks to collect money and make it also difficult for the real sector to borrow money, will it not affect the real sector?

That is what is happening. That’s why the minister of finance says CBN should bring down interest rate, while CBN insists that lower interest rates will fuel spending and drive inflation beyond tolerable or supportive limits. In any case, the CBN must explain why it readily adopts the more expensive and debt inducing option of selling Treasury Bills to mop up surplus liquidity, when less cumbersome results could be achieved with much higher mandatory Cash Reserve Requirement.

How best can the power situation be handled? Are you satisfied with the way…

You see, leave out the issues of privatization and all the rest, you see, as a journalist, you are probably aware that almost all the power firms are hugely indebted to the banks, so it is fair to say that the major problem of power companies is probably inadequate access to cheaper funds. Inflation, cost of funds and exchange rate, huge cash injections into the system is counterproductive as intervention funds, because the actual problem is not that of no money but that of too much money and a threat of inflation. As earlier explained, however, cost of funds cannot be sensibly reduced, if inflation rates remain in double digits, while inflation will also remain unhinged so long as Naira liquidity surplus remains systemic.

Henry Boyo

Now you have explained what the government ought to do that was not done, what can individuals do to survive hard times?

Simply, cut your coat according to your cloth and don’t buy things that are not essential to the welfare of you and your family.

Are you satisfied with the level of diversification efforts going on?

Diversification will not evolve just because you express the wish; all governments before now promised diversification but since these administrations remained in denial of the need to sustain supportive monetary indices, their promises inevitably have become mere propaganda. We cannot diversify anything without inflation coming to best practice levels, without access to low cost of funds; cost of funds is responsible for power, cost of power is critical component of industrial cost of production. So on what platform are you going to diversify; if government pumps money into the system to diversify, this will further drive inflation.

As I have explained to you six trillion is all your government has been given approval to spend in 2016, this is barely $18bn, which is peanuts compared to the projected $1Trillion economy. The banks are supposed to fill in the funding gap, but the banks instead of filling the gaps directly to the real sector, what are they doing, the CBN’s response to the banks is, “forget about the real sector, we will borrow all the money from you and pay you handsomely, because we are going to conserve the money to avert spending”. So who is killing who?