Naira on trial: To devalue or not

The above was the topic of a colloquium which was conducted by The Cable; an on-line publication on Thursday, February 11, 2016 at the Civic Centre in Victoria Island, Lagos. It is in order to congratulate the publisher of The Cable; Simeon Kolawole for this laudable initiative.
As Kolawole himself observed during the colloquium in his opening remarks; some people simply criticize policy initiatives while some are passive observers of events but some take a decision to contribute positively to generate ideas which hopefully could facilitate the crystallization of consensus for the solutions of existential problems.
As should be obvious The Cable had started on a positive note by hosting the colloquium. I was reluctant to attend the well-publicized programme for the reason that I had argued to myself that my stand on Naira devaluation is well known to all who have followed discussions in this connection and had been generously canvassed through various media platforms in this country including electronic media.
I recall that the last paper I did on this matter which had the caption: ‘Devaluation is not the panacea’ was generously
 
published and attracted comments from across the spectrum of this country.
I remember one call I received while in Abuja from someone who I hold in high esteem who wondered why I had to write like that! Therefore I was not physically present deliberately but enjoyed the privilege of following the discussion live on Channels Television as the programme was streamed live.
The panelists for the colloquium included the Edo State Governor, Comrade Adams Oshiomole as the lead discussant with Moses Tule; Director Monetary Policy Department at the Central Bank of Nigeria, Bismarck Rewane, Chief Executive Officer of Financial Derivatives, Comrade Isa Aremu; Deputy National President of the Nigerian Labor Congress, and Muda Lawal; the Director General of the Lagos Chamber of Commerce and Industry who was represented at the event by the Director of Research at the LCCI, Dr. Vincent Nwanem.
Frank Aibogun; founder and publisher of Business Day newspapers was slated as the moderator of the colloquium even if at some point in time the compere almost hijacked that role from him.
In his opening remarks Kolawole gave expression to his distraught with regard to taking a stand on whether to vote for the devaluation of the Naira or not. But for some of us who are regular readers of his back page articles on This Day on Sunday we do not share that apparent confusion as his stand on this matter is well advertised and known.
Just like with any matter under consideration there are merits and demerits and what ultimately matters is the tilt of the balance and as the publisher recently observed the problem with devaluation is that there are no guarantees but only expectations!
And a logical consideration of this matter would support this conclusion. For instance who says that we shall experience accretion to our reserves if we devalue as is being proposed to attract external inflows? Is it not logical that even as we take this step that the attitude will be that of wait for further inevitable devaluation to follow before any move is made?
The Lead discussant, Comrade Adams Oshiomole was vintage as he deployed and unleashed as usual native intelligence in leading discussion. He asked rhetorically that if the Naira was on trial who was taking the Naira to court; who were the prosecutors and who were the defenders?
He promptly concluded that those prosecuting the Naira and wish to stampede the Country to follow the devaluation route are the investment bankers as well as currency speculators which particularly includes foreign based portfolio investors, hedge funds manager and their supportive rating agencies etc. who more often than not take a position based on their received intelligence on the matter and would proceed to act in any manner to possibly bring about the fulfilment of this forecast.
For me the punch line was the observation by the Comrade Governor that if devaluation was the answer we would still not be discussing it as a way out today referring to the fact that the Naira had been consistently devalued commencing from mid 1980s following the introduction of the Structural Adjustment Programme and we are still here today discussing its desirability.
Oshiomole also decided to wear his labour leader cap when he observed that devaluation will impoverish further the working class who would be waiting to ask for wage increase should the country attempt to succumb to the decision to devalue.
He therefor jocularly concluded that he will queue behind his commander in chief, President Mohamadu Buhari as well as the Central Bank in voting against devaluation.
And when towards the end of the colloquium the discussion veered towards which rate of exchange should guide decision making in the country he argued that the real economists are the market women in his village who do not care a hoot about such niceties as they pursue their daily activities.
Tule in his intervention observed that devaluation is sound economics when the fundamentals are right.
He was here alluding to the fact that devaluation in some countries had been adopted to boost productivity to increase market share as was quite recently experienced when the Chinese attempted to devalue their currency and the Americans were up in arms cautioning that such moves could precipitate competitive devaluation which is not good as it offends the core tenets of World Trade Organization in its efforts to ensure trade and commerce is not impeded in any manner whatsoever.
But I thought when the issue arose as to which rate should drive economic decisions in the country between the interbank and the parallel market rate that the matter should have been properly closed by referring to the volume of business which goes through each channel.
The representative of the Lagos Chamber of Commerce and Industry in his intervention bemoaned the fact that what we are currently experiencing is uncertainty instead of risk with regard to the frequent changes of policies.
And that their membership is in business of managing risks not uncertainty. But we have a crisis in our hands and to a large extent it has become a game of wits between the regulator and the operators.
And therefore all concerned should strive to adjust and come to terms with the situation as it is today which we hope would stabilize before long.
He as should be expected alluded to the 43 items which have been exempt from access to official foreign exchange announcing the fact that operations are being wound down as a result resulting in massive job losses and that their members are generally handicapped for lack of availability of foreign exchange to carry on their business at the desired level.
When it was time for Rewane to make his contribution I empathized and was full of compunction considering the trend of discussions and his well-known stand on the imperatives of devaluation.
And when he did make his presentation the pressure which he was under was palpable but he still managed to put in word regarding the fact that there is misalignment on the rate of exchange as it is currently and that there is a need for a policy for the management of the exchange rate whatever that means as I understand a policy to succinctly mean what objectives to pursue in this respect as well as the strategies to support their attainment.
It is difficult to have a policy for a matter which is not entirely under your full control.
• Dr. Chizea wrote from Lagos