On August 15, the exchange rate was tending towards N980/US$. Mid-day, it was announced that the CBN would take steps to curb speculation. That threw forex speculators, not economists, into a panic.

By the next morning, the exchange rate on Broad Street dropped to N760-790/US$.

One associate who had wanted to change some dollars asked me what to do, sell or not? He was afraid that with such a sudden decline the rates might fall further. I told him to hold his dollars.

He asked me why? I told him not to believe the Central Bank of Nigeria and the Federal Government; because, nothing among the variables influencing exchange rates indicates that the CBN or government had the dollar inflow to affect the rates positively.

I developed my own model for predicting the direction of exchange rates since the 1980s; and only once, when the US-Iraq first war in the 1990s produced a “crude oil bonanza”, had my forecasts for any year been wrong.

But, that was because the conflict occurred suddenly and ended as quickly, giving no time to calculate its economic impacts accurately.

Something told me that the Federal Government and CBN were just bluffing. Those who panicked and sold large quantities of dollars were stupid. Of that, I was absolutely convinced.

NNPCL Intervention: Failed Gimmick

“A fool is born every minute.” P.T Barnum, 1810-1891. US Showman

P.T Barnum, was a showman, who two centuries ago was famous for promoting hoaxes, to fool unwary citizens.

He absolutely believed that there are more fools in any society than wise people.

He profited immensely from that belief. Nigerian governments since 1960 have been treating fellow citizens the same way. They repeat the same old tricks; each and every time they are overwhelmed by events beyond their control and for which they have no credible solutions.

Mid-day August 16, the cause of all the tempests in a tea cup became clear. The Nigerian National Petroleum Company Limited, NNPCL, had secured a $3 billion loan from the AFREXIM Bank “aimed at stabilising the exchange rate”. Was this a joke? It was not funny.

Certainly, the Federal Government and CBN were the ones panicking; and they have infected the market with the symptoms of their disease.

Instead of admitting that the Federal Government and CBN have no clue regarding how to stop further depreciation of the naira, they introduced a tried-and-failed gimmick.

The CBN first announced steps to be taken to make speculators pay a heavy price. Some people reacted as expected, the naira appreciated for a few hours. But, soon, the trend was reversed and the steady depreciation continued.

The CBN announcement and the sudden intervention approach were tried twice under Emefiele.

The First time was when the exchange rate raced to N400/US$1 while official rate was N250/US$1. The second was when the parallel market rate crossed N700/ US$1.

The CBN had bluffed on each occasion, the rates came down temporarily. But, on each occasion, those who sought my advice have been told to ignore CBN; to wait and see. They have seen the rates go up more every time.

Nothing confirms my position better than what happened after it was disclosed that a mere $3 billion loan was secured by the NNPCL to stabilise the rates. By evening time, the rates were back up to N880/US$.

Meanwhile, the Bureau De Change operators who were being harassed– illegally I might add– by the CBN, were being forced to promise that dollar will no longer exchange for N900.

The BDCs know too well that they exercise very little control over market-determined exchange rates.

The interplay of supply and demand will decide where the rates are headed.

There is very little they can do about it.

The Federal Government is just using the BDCS as whipping boys in order to deceive the ignorant public that they were taking measures to reduce exchange rates.

Why $3bn Will Not Solve The Problem

“O! What a tangled web we weave/When first, we practice to deceive.

Sir Walter Scott,1771-1832. VBQ p 35.

Deceit number one: The NNPCL is not the organisation charged with stabilising the exchange rate.

The CBN is the entity. The Group Managing Director of the NNPCL could not have gone to Afrexim Bank requesting for a loan of $3 billion to be used to stabilise the naira.

The man would have been thrown out of Afrexim Bank or they might have called for an ambulance to come and remove a deranged man.

The $3 billion was certainly not meant to stabilise the naira.

Too little and too late would have been a charitable description of the $3 billion intervention – if those advertising it as a measure had been honest about it. But, they are not.

The Federal Government, CBN and NNPCL know very well that $3 billion is like a drop in the bucket compared to our real needs and the amount which can permanently stabilise the naira. Foreign airlines, manufacturers, banks, parents, etc, will be needing foreign exchange in excess of $200 billion in the next three to six months.

The $3 billion, if placed in the open market would have disappeared in less than one hour. As it turned out, the inflow was not even meant for the market. The loan was obtained for a private purpose.

Finally, NNPCL will in the future, after the $3 billion had been spent, have to repay Afrexim Bank $3+i billion dollars in the future; I being the interest on the loan. Clearly, all they have achieved was a minor shift in the trends – which cannot last. NNPCL will need more dollars to repay the loan ultimately.

The Real Problem Remains Unsolved

“It is a matter of cash”. That was the name given to one of the most popular television programmes of the 1970s. Nigeria’s exchange rate problem is also a matter of money; specifically, it is a matter of earning sufficient dollar revenue to fund our needs for foreign exchange.

The Tinubu government has concentrated on sharing the cake, bringing more free-loaders, called Ministers, into the national payroll than in earning revenue to pay our bills.

Crude oil production, export and sales still constitute our largest source of dollar revenue. From June to August 2023, crude production, on the average has plummeted to the lowest volume in more than nine years.

Granted, the price of crude has gone up a bit, but, Nigeria’s loss of production has made it impossible for the country to take advantage of higher crude oil prices.

Meanwhile, higher crude oil prices result in increased fuel prices. Nigeria pays more to import fuel than we earn from crude export. As long as that situation continues, no amount of shock therapy – like the dubious $3 billion infusion – will stabilise the naira.

A significant amount of foreign exchange revenue is also earned by some parastatals – NPA, NCC, FAN, CBN, Customs, Immigration, EFCC, NDLEA etc – as well as Ministries.

Under Jonathan and Buhari, most of the Ministries, Departments and Agencies, MDAs, have become dens of robbers in which the top officials work for themselves. Billions of dollars are draining into private pockets.

I am certain the Federal Government can earn about 15 per cent more revenue by adopting a simple practical approach. Otherwise naira stabilisation will continue to elude us.