Naira Redenomination: The FEC/CBN Face-Off

It did not sit very well with me when I heard earlier this week that the CBN Governor Charles Soludo (yeah, that’s him on the pic) was called before the Federal Executive Council (FEC) by President Yar’Adua to ‘explain’ his policy of naira redenomination. The Naira is Nigeria’s currency and only just shrugged off the inflationary pressures of a debt-ridden, flux-susceptible economy. At the moment the country is practically debt-free and remarkably solvent, with a dollar reserve of over US$40 billion, but the value of the Naira hardly reflects this. Meanwhile market transactions in Nigeria are still predominantly paper-based, entailing that the Central Bank is constantly burdened with the printing of fresh bills to sustain market liquidity, shrinking the monetary base as a result and making it harder to keep inflation at bay or revalue the nation’s currency. A possible solution would be to raise interest rates, effectively dampening loan requisitions, but this move would discourage investors, whom the Nigerian economy rely to supply the much-needed foreign direct investment (FDI). At any rate, a cessation of cash flow would be counterproductive, retarding economic growth and bringing back the lean years when Nigeria crawled, begging bowl in hand, to the Paris Club. But where the status quo to be maintained, the economy would’ve suffered the self-same outcome. Charles Soludo figured it was time for what a certain pastor I know would call “a paradigm shift”.

Last week Tuesday he unveiled his plan, which was essentially a fixed exchange rate policy. He announced that by January 1, 2009, two zeros would be knocked off the naira, placing it at ballpark parity with the dollar (N 1.25 per US$1.00, more precisely), a move that would simultaneously raise its currency value and effectively staunch the mint ‘bleed’, as it were. This is something the Chinese have already done (with resounding success, I might add), and I hear the Ghanaians executed the same play last month, but Soludo’s strategy implementation comes with a twist. He stated in addition that, effective from said date, federal and state government extra-budgetary allocations would be paid out by the CBN to respective parties in dollars. Now that even more drastically diminishes the need for minting vast sums of the naira, being that government is the country’s biggest spender, inducing scarcity of the local currency and fortifying its revaluation. One consequence is that as money is expended at the federal and state levels of government, it is the dollar that gets dissipated, not the naira; this reduces the economy’s monetary base, which has what economists call a ‘contractionary’ effect and lowers inflation, without having to raise interest rates or adversely affecting the spending habits of the capital market. Another positive impact is the attraction of foreign investors, who will reckon the added value of the local currency as a sign of growing market stability, encouraging them to ‘pitch their tents’ more permanently, if you will. Already, the robust fiscal structuring of Nigeria’s banks is well-known by now, a feat made possible by the forward-thinking CBN Governor.

Interestingly, there are other implications drawn from Soludo’s statements which may have stirred quite the hornet’s nest. One inference is that in order to avert the dangers of over-dollarisation of the money market, the CBN may be compelled to regulate both budgetary and extra-budgetary cash flow issued to the federal and state governments. This has raised a few eyebrows in these circles, and there are concerns that, while the government maintains that the autonomy of the CBN is not in question, calls by the economic advisers of the FEC to ‘fine-tune’ the plans might conceal concerted measures to reverse it. At any rate, implementation will require a delicate balancing act, and it is my hope that the need for clarification is the only reason the FEC summoned Soludo to its fortnightly session. But I strongly doubt that yesterday’s courtesy call by the IMF and World Bank emissaries on the CBN Governor were equally innocent. In their statement, they are also here for ‘clarification’, but “methinks more ominous business is afoot”. Here’s why. If my inferences from Soludo’s press statement are accurate, another goal of naira redenomination is to raise its value as a reserve currency in the West African sub-region and across the Sub-Sahara, entailing that countries in these areas will increasingly find it more convenient to compose their currency reserves in naira, alongside the US dollar and the euro. As momentum ramps up in this direction, the naira could fulfil AU visions of a single African currency, at least in contest with regions where the South African rand holds sway, and the hegemony of the dollar could be gravely at risk. Evidently, the IMF and World Bank, minions of the G7, have also been looking into their crystal balls like Soludo, and are here to see if they could not persuade our Nostradamus in other less …‘baleful’ directions, as it were. Hmm…I wonder if such hurried meetings were scheduled when Ghana toed the fixed rate line.

Now the FEC has been advised by its Economic Team, a state brain-trust, to review the date of implementation, i.e August 1 next year, and to reconsider the gradual phasing out the old currency, citing concerns of cost incurred in the process, which admittedly is sound logic but tantamount to a ploy of dilatory tactics. Naysayers like Comrade Abiodun Aremu of the UAD party (never mind what that means), are equating Soludo’s plan with the infamous Structural Adjustment Programme (SAP), forecasting doomsday if executed. My opinion? The FEC’d be better off not to meddle with the autonomous affairs of the CBN. And might I respectfully suggest that the Comrade shut his pie-hole? Much obliged.

Opportunity for Murderous Impunity - The Yazidi Massacre

The death toll of Iraqis, which in recent times has probably exceeded the length of a million Muslim prayer beads, just got a bit longer. 250 are feared dead, 350 wounded, as Al Qaeda bomb attacks in the Yazidi villages of Khataniya, al-Jazeera and Tal Uzair shattered the rustic tranquil of their abodes in another million clayey pieces. This is not news. What I find bone-chilling is how oh, so nearer this recent spate of bloodletting has brought home the reality that, following America’s evacuation, Iraq is destined to disintegrate in countless shards of tribal fiefdoms on the incarnadine foreground of a brutal civil war.

Until the current Sunni-led attack, Kurdish settlements were for the most part unaffected by Iraqi insurgencies. This observation gave the slightest of hopes to proponents of the American invasion for containment of the vitriolic Sunni-Shiite ethnic conflict within the greater Baghdad geography. That was until general outrage was sparked off by the public stoning of a Yazidi girl who had married a Muslim and converted to Islam. This barbaric ‘honour-killing’ especially incensed Muslims in Iraq, who view the Yazidi as devil-worshippers or devotees of Shaytan, the Qur’anic variant for Satan. For their part, the Yazidi refer to him as Melek Taus ((Tawûsê Melek in Kurdish), or the Peacock Angel, leader of a Heptad of angels who govern the earth. They adhere to a strict code of religious purity, evident in their caste system and intra-marriage customs, which meant that the girl’s apostasy could only be visited with summary ruthlessness. Consider the irony, then, that another faith noted, if infamously, for inviolate compliance with religious purity, Islam, should find this pious display of fundamentalism so palpably odious! In true fundamentalist style, the retaliation was equally unadulterated. In April, Al-Qaeda gunmen shot dead 23 Yazidi factory workers in Mosul. The 3-way bombing detailed above was an assuredly bloody follow-up, claiming more lifes in a single concerted attack than ever witnessed since 2003, according to The Guardian (You've gotta admire their sense of dedication, these extremists!).

And so, with this most recent of blitzes, the vicious arc of extremist violence turns full circle. In the meantime extremists continue their mass butchery gleefully, their bloodlust yet unsated. Bush may have been decried vehemently for opening the Pandora’s Box, but for the extremists, he is their Prometheus, bearing the benevolent gift of purging fire. And Iraq smoulders still within its unslaked flames.

Ajuwaya! ("As You Were!")

Guess what, folks? L'il sis just completed her Corps service! And for those of y'all who are clueless what I'm speakin' of, it's the National Youth Service Corp Programme, a 12-month drudgery all Nigerian graduates undergo before they invade the employment market, sorta like the calm before the storm, the rat-race for jobs, y'know... I'm so proud of her. She just got back from Abuja where she served, bringing in tow three Certificates of recognition for her excellent delivery. That' s her shortly before she left. Don't she look so pert 'n l'il :-)? How time flies, eh...?

On other turn of events, an electric hum buzzed through the nation’s macroeconomic sector with the recent unveiling by Central Bank Governor, Charles Chukwuma Soludo, of his plans to achieve near-parity value of Nigeria’s fiat currency, the Naira, with the US dollar by 2009. Wanna know how this seemingly grandiose plan is gonna work, what pitfalls may likely beset its progress, and why the country is itself, including the President, befuddled by the plan? Keep it here, guys, and you just might find out!

The Great Garden City 'Blackout'

Ah, Port Harcourt, River State, ain’t the Garden City it used to be. A drive through the ‘petropolis’ imparts that foreboding feeling of being watched by a legion of furtive eyes. With security road-blocks dotting major trunk roads, military stations hurriedly erected mid-city and the remnant expatriates only capable of traversing the city in herds, with busloads of military escort at all times, one would be forgiven to think he’d stepped into a state-of-emergency situation. Nightlife in particular is languishing fast in the absence of the foreign big-spenders. Call-girls have never had it so bad. Some are hightailing it to Lagos in droves, where major oil multinationals are said to be relocating. Clubs whose patronage drew heavily from these riggers are closing shop permanently, while others have had to lose a star or two in standards to accommodate the locales and stay in business. A cheerless chore, recounting the downgrade in affairs, especially when one is conversant with what a bustling, breezy fair exploring the city’s seedy suburbia was acclaimed to be (Who, me? I haven’t the slightest idea).

Another industry suffering a serious setback due to the Great Garden City ‘Blackout’ is the infamous abduction racket. Practitioners who just joined the kidnapping business have been sorely distraught to discover that there are no oil expatriates left for easy picking. The result has been a resorting to desperate measures. No longer interested to operate under the guise of ‘freedom-fighting militants’, these man-hunting malefactors are now snatching any human that even remotely reeks of value, grabbing mulatto kids on their way to school, indigenous company managers heading home from church and foreign construction engineers at building sites (I wonder when they’ll start plucking off albinosJ). The latter scenarios recently involved an Elf company manager, Mr Peter Aguma, abducted on his way home from Sunday service, and a Pakistani engineer, who was nabbed while at a construction site in Ogoniland. With options fast thinning out, even relatives of government officials have been targeted. Two weeks ago, armed men beached commando-style on an island in Yenogoa, Bayelsa state, where the Deputy Speaker’s mother was abducted and a message left behind requesting substantial ransom money. The following week the ordeal was repeated, this time involving the Rivers State Governor’s mother. There are political connotations however to these latest events – and haven’t there always been, if one may ask? The crows, it would seem, are coming home to roost.

Needless to say, robbed of steady ransom income, Garden City criminals have resumed their day-job on the streets. Street stick-ups and burglaries have soared – but with a slight elevation in style, it would seem. Recently, a gentleman exited a shopping mall to find his recently purchased Peugeot 206 coupe missing. Expectantly, the fella was devastated, prancing about in panic without a clue what to do. It so happens he’d forgotten his cellphone in the passenger seat, so he hustled to a pay-phone booth and rang it. Starting off with a nervous “Hello,” he waited with bated breath for a response – and was pleasantly surprised. The carjackers calmly acknowledged that they were the robbers that took his car, but that it had only served as a get-away for another operation entirely. It would be parked at So-and-so Street, they said, with the car keys deposited under it, as they weren’t interested in keeping the admittedly low-priced car. Apparently, robbers have taste, too…

PS: On a sad note, it has been reported that the father of the first mulatto child abductee, Margaret, recently died of kidney complications. It is said that he was to travel overseas for medical check-up on his condition before his daughter was kidnapped and the trip had to be delayed, with funds intended for the impending operation diverted to pay the ransom. Meanwhile, it’s become a dog-eat-dog situation on the streets of Port Harcourt with rival militant gangs gunning down each other - to ratchet down the competition, it would seem. Government media is however calling these gunfights the handiwork of varsity cultists. Now, someone enlighten me: why, if these are cult clashes, have no shoot-outs been witnessed on college campuses? Is it just me, or do I smell cover up?