The World Bank’s recent report on Nigeria’s beleaguered economy suggests that the Central Bank of Nigeria (CBN) is chasing shadows with its trademark manipulation of monetary policy instruments in the hope of stabilising the naira and curbing spiraling inflation rate.
The bank warned that Nigeria’s perfidious multiple exchange rates policy was responsible for the naira’s disorderly retreat in the foreign exchange market and the spiraling inflation rate. The apex bank has defiantly operated the multiple exchange rates which empowers corrupt government officials and the treacherous operators of Nigeria’s 6, 000 bureau de change (BDCs) to round-trip foreign exchange from CBN’s official window to the parallel market.
The situation is so precarious that last week the margin between the official window and parallel market rates sailed perilously close to N300 per dollar. The naira closed last week at an abysmal rate of N720 to the dollar in the parallel market while the official rate remains defiantly at N430 to the dollar.
At that rate anyone round-tripping just a dollar from the official window to the parallel market reaps a sumptuous yield of N290. Those who are privileged to yank off $1million from the idle official window rake in N290 million for doing just nothing.
The primary losers are foreign investors. With an acute shortage of foreign exchange plaguing Nigeria’s one-handed forex market, foreign investors trying to export proceeds of their investments would inadvertently tie them down for months or grudgingly buy forex from the parallel market to export.
The impatient ones who follow the unofficial path would lose N290 million for every $1 million dollar they export. That explains the drought of forex in the market as CBN is practically the lone supplier.
With the Nigerian National Petroleum Corporation (NNPC) Limited fraudulently hoarding the proceeds of crude oil exports in the name of funding a dispicably fraudulent petrol subsidy, Nigeria gains practically nothing from the upbeat in crude oil price fueled by Russia’s unprovoked war in Ukraine.
NNPC claims that Nigeria’s daily petrol consumption inexplicably hit a record 92 million liters in August. The corporation deducts petrol subsidy at the rate of about N124 per liter for the fraudulent figure of 92 million liters per day.
That leaves practically all the crude oil exports earnings for the month funding petrol subsidy alone while the federal government funds other exigencies through massive debts that is now serviced with 119 per cent of the nation’s miserable revenue.
Nigeria’s economy is bleeding from both ends. Debt service and petrol subsidy consume something close to 150 per cent of its miserable revenue leaving even the funding of its outrageous cost of governance to the imagination of helpless politicians.
The irony of Nigeria’s bleeding economy is that everyone from the 36 governors to the 469 members of the National Assembly is convinced that NNPC is duping Nigeria through cooked up petrol consumption figures.
No one is bold enough to demand import documents justifying NNPC’s touted daily consumption figures.
At a time when inflation has forced millions of motorists to drop their cars for the rancorous public transportation systems, Nigeria’s daily petrol consumption cannot be more than 30 million liters.
The figures flaunted by NNPC therefore suggest that 62 million liters of petrol is smuggled into five impoverished neighbouring countries.
The whole of ECOWAS cannot consume the amount of petrol reportedly being smuggled into Benin, Togo, Niger, Chad and Ghana.
NNPC should learn to tell lies that would be difficult to verify. The lies over Nigeria’s daily petrol consumption figures are just too transparent to convince even a blind man.
Everyone knows that impoverished Niger Republic has a refinery that processes 20, 000 barrels of crude oil per day. The land-locked country consumes just what is processed from 5, 000 barrels and exports the balance to Nigeria.
No one will buy NNPC‘s story of smuggling millions of liters of petrol into a country that Nigeria shamelessly imports refined petroleum products from.
The rulers of Nigeria are just punishing the 130 million Nigerians languishing in abject poverty by criminally ignoring the day light robbery perpetrated by NNPC through petrol subsidy fraud. Someone should be bold enough to stop the fraud and save Nigeria from the precipitous descent into the financial abyss.
The CBN responded last week to the surge in inflation caused by a catastrophic depreciation of the naira by hiking its monetary policy rate (MPR) from 14 per cent to 15.5 per cent and pushing cash reserve ratio (CRR) to 32 per cent in a desperate bid to mop up liquidity and give the naira some breathing space in the forex market.
That is the instrument used by developed economies to combat the inflation surge triggered by high energy cost.
The instrument tames inflation in the developed economies because practically all money in circulation is in the banking system.
Nigeria is a lawless society where things are done in the reverse. Because of unmitigated corruption, about 60 per cent of the money in circulation in Nigeria is in unholy places in the homes of politicians and top civil servants.
When the CBN hikes lending rate and mops up liquidity through higher CRR it ends up starving the banking system of funds while the money in corrupt politicians’ homes is used to chase the few dollars available in the forex market.
That keeps the naira depreciating precipitously while the CBN’s monetary policy measures hike the cost of funds for the business community and ends up fueling inflation as producers of goods and services pass the higher cost of funds to consumers.
CBN’s fight against inflation through manipulation of monetary policy instruments has failed the system catastrophically because the underlying factors fueling inflation are criminally glossed over.
Artisans and retailers hike prices arbitrarily. Government has no way of regulating them. A big bunch of plantain leaves the farm in Edo state at N1, 500. The women roasting plantain at roadsides in Lagos buy it at N3, 000. They sell one finger of roasted plantain at N200.
The 50 fingers of plantain in a big bunch fetch anything from N10, 000 from what was purchased at N3, 000. A medium size tuber of yam leaves the farm in Benue state at N400. Those hawking it in wheel barrows in Lagos sell it for N2, 500. That profit margin borders on profiteering.
Nigerian retailers are responsible for 50 per cent of the surging inflation. CBN is just groping in darkness by fighting inflation with monetary policy instruments. The fiscal intervention needed to win the war is conspicuously missing.