•How foreign currency hawkers became victims of Lagarde’s visit
By ISAAC ANUMIHE
The Managing Director of the International Monetary Fund (IMF), Ms. Christine Lagarde came to Nigeria on January 4 to begin a three-day working visit.
Her white private jet with registration number ZS PNP touched down on Nigerian soil at 2.44pm at the Presidential Wing of the Nnamdi Azikiwe International Airport and she was quickly ferried out of the place in a convoy resemblance of any visiting president to Transcorp Hotel from where she was taken to the villa where a banquet was lavishly organized for her.
In her convoy were the Governor of Central Bank of Nigeria (CBN), Mr. Godwin Emefiele and the Minister for Finance, Mrs. Kemi Adeosun, as well as foreign investors who intend to invest in Nigeria.
Her visit to Nigeria provided an opportunity of strengthening the Fund’s partnership with the largest economy in Africa.
During her visit, she met with President Muhammadu Buhari and other senior leaders, along with business leaders, prominent women, and representatives of the civil society. She also met with legislators and had a get-together with children in the orphanage home where she donated, on behalf of IMF, a cheque of N1.5 million.
Lagarde said ahead of her trip: “Nigeria is working hard to improve its business environment, promote opportunities for growth in the private sector, and strengthen social cohesion, all areas where the government has an important role to play.”
\The IMF helmswoman who left Nigeria for Cameroon on January 9 where she was expected to hold talks with President Paul Biya and his economic team, as well as private sector executives, women leaders, and other members of Cameroonian society, rated Nigeria’s economy high and emphasized that Nigeria, in spite of its economic quagmire, needs not borrow if its revenues are properly harnessed.
She spoke against any attempt to devalue the naira adding that the government should put solid economic measures in place to strengthen the financial sector and to channel more resources to grow the real sector of the economy and the Small and Medium Scale Enterprises (SMEs).
Lagarde disclosed that the IMF has had series of meetings with the representatives of the banking industry and came out with strategic mechanism of sustaining the Nigerian banking sector.
“This morning I have been with the CBN governor. I have also been having series of meetings with the representatives of the banking industry and we have assured ourselves of a strategic defence on how to sustain the banking sector. We also have discussed how the financial sector can help contribute in financing the economy and support small and medium scale business and the development in Nigeria,” she coached.
But she advised strongly against the activities of the Bureau de Change (BDC) market in Nigeria saying that they should be improved upon.
Kill the BDCs
Two days after Lagarde left, Nigeria implemented the advice. So, on January 11, the CBN came hard on the BDCs, refusing to fund them and allowing them to source their funds from autonomous sources. This has put a serious strain on the market with some of them closing down.
According to the CBN Governor, the BDC owners engage in multiple illegal buying of foreign currencies from the CBN, so placing a serious burden on the bank.
“More disturbing, though, is the financial burden being placed on the Bank and our limited foreign exchange. The CBN sells US$60,000 to each BDC per week. This amount translates to US$167 million per week, and about US$8.6 billion per year. In order to curtail this reserve depletion, we have reduced the amount of weekly sales to US$10,000 per BDC, which translates into US$28.4 million depletion of the foreign reserve per week and US$1.476 billion per annum. This is a huge hemorrhage on our scarce foreign exchange reserves, and cannot continue especially because we are also concerned that BDCs have become conduit for illicit trade and financial flows.
“The Bank would henceforth discontinue its sales of foreign exchange to BDCs. Operators in this segment of the market would now need to source their foreign exchange from autonomous source. They must, however, note that the CBN would deploy more resources to monitoring these sources to ensure that no operator is in violation of our anti-money laundering laws,” he fumed.
IMF owes us more -Enwegbara
Since Lagarde left Nigeria, a lot of economic policies have been made and the financial sector has been hard hit, a situation that has attracted so many criticisms.
A development economist, Mr. Odilim Enwegbara, said: “Maybe the IMF can help us fast-track the identification and repatriation of our stolen fund hidden overseas.
Since the credit power has moved from the Wall Street banks to now Chinese government controlled banks, the power to dictate that was earlier fully controlled by the IMF acting on behalf of western lenders’ interests is now in Chinese hands.
This truth is being reinforced by the emergence of the China-led Asian Infrastructure Investment Bank (AIIB), which currently has over 57 members including South Africa as the only African member.
Since this is where the future of infrastructure financing lies, it is highly advisable that Buhari administration begins to give Nigeria’s membership of AIIB the serious consideration it needs.
The China swing
Without expecting IMF loans, the Fund’s assessments of Nigeria’s will only remain mostly neutral while its advise to our government will never be mandatory.
Countries like China where most of the borrowings by the Nigerian government will take place already have their own independent assessment tools as well as lending conditions quite different from IMF’s.
China, for example, is almost always interested in–and insistent on–loans having projects attached to them, projects that are wholly or a major portion executed by Chinese firms.
With our debt-to-GDP ratio at about 12%, against our peers’ more than 60%, we are so creditworthy that we can comfortably borrow as high as $270b during the next four years without being debt trapped so long as going forward all our debts are project-driven, particularly infrastructure based loans that by reducing our current infrastructure deficit, reduces the present high cost of doing business and high interest rate causing high arbitrage.
Regarding IMF’s promised technical support, I strongly believe that Nigeria has all the technical expertise in the country to address all our current economic challenges, including the ongoing efforts to block leakages in revenue and wastages in expenditure.
Because we are modernizing tax policies to increase its coverage in ways that increase this year’s tax-to-budget ratio, I think, since it isn’t a rocket science, we can have no need for foreign hands, especially the IMF, which has never run any economy, not to mention ones like ours.
That explains why I strongly believe that we do not have the kind of luxury of time to begin this kind of having to wait for ready-made solutions that even if have worked elsewhere may not necessarily work for us given our economic and cultural differences. Of course, these so-called western technocrats should be the least to have understanding of our complex economic realities.
Best solution
Home grown solutions, as far as I am concerned, are always better because not only they enjoy a lot of wider national input but of course by enjoying wider acceptance and easily and better implemented by learning from field mistakes helps constant fine-tuning.
President Buhari made us proud not only the way he well received the IMF boss but also for making it clear to her that should we need the Fund’s help in dealing with our macroeconomic challenges, definitely we would be the ones contacting them. But that as it stands, we have what it takes to address our present problems.
Where I think her advice was misleading is her insistence that Nigeria should not borrow again. I was instead expecting her to insist on government justifying borrowing by borrowing purely for investment rather than for consumption driven by big government which was rampantly the case during the Jonathan administrations when Nigeria was running year-in-year-out fiscal austerity while maintaining bloated recurrent spending.
Lagarde should appreciate us
Therefore, I was expecting Ms. Lagarde to applaude the Buhari administration for its bold efforts to drastically increase investment in capital projects, which he couldn’t do without having to borrow. Even though a lawyer not an economist, her experience as someone who as a former French minister of finance would have guided her advice in a way to agree that there’s no other way Nigeria should expect to solve huge infrastructure deficit head-on than to engage in massive borrowing, especially at a time when it’s main source of revenue, oil, is witnessing unprecedented plunge.
Or isn’t it hypocritical of her to be advising us not to borrow given our debt-to-GDP ratio which at about 12 per cent is by far the lowest among our peers? Or, why are the rich nations also the most indebted nations in the world? In other words, how many times has she advised against Japan’s debt-to-GDP ratio which currently stands at 224%, Italy’s at 128.50%, US’s at 107%, France’s at 95%, UK’s at 89.80%? What about Nigeria’s peer countries like South Africa with debt-to-GDP at about 44%, India’s 66.10%, Brazil’s 60.8%, Kenya’s 50%, Ghana’s 67.50%, and so it goes?
Is she fair to Nigeria that with its over $350billion infrastructure deficit it is okay for us to remain in a league of nations with some of lowest debt-to-GDP ratios like Algeria’s 8%, Kuwait’s 7%, Afghanistan’s 6.6%, Libya’s 6.10%, Saudi Arabia’s 1.60%, etc?
Notwithstanding her hypocrisy on debt, I liked how she carried herself and particularly her expression of immense trust in the Buhari administration and by making it clear that Nigeria does not need any money from the Fund given the ongoing restructuring and reengineering of the Nigeria’s economy taking place right now”