24062019 - EDO Oyegun Oshiomhole ateach others troats


Vanguard Newspaper 24 June 2019

30 — Vanguard, MONDAY, JUNE 24, 2019


The wrong way to defend the naira

AREPORT on Page 33 of

the June 21, 2019 edition

of The Punch Newspaper

indicated that “between April

2018 and March 2019, the

Central Bank of Nigeria

injected over $42.3bn into the

foreign exchange market to

ensure liquidity in that

segment of the economy.”

In the same report, Isaac

Okorafor, CBN’s Director of

Corporate Communications

also attributed the relative

stability, in the forex market,

largely to CBN’s continued

intervention; furthermore,

according to Okorafor, private

international money transfers,

estimated at over $20bn

annually, plus the Naira swap

arrangement with the Chinese

Yuan, have all contributed to

relative stability in the forex


Conversely, however, the

same edition of the Punch

Newspaper, also carried

another story titled “DMO

records 655% oversubscription

at Treasury bills auction;” Page

35, notably, the DMO had

rolled over a total of N17.61bn

at its Treasury bills auction on

Wednesday 19th June 2019,

when CBN borrowed at a cost

ranging between 9.6% and

12.2% respectively for the bills

offered for sale.

The implication of the above

is that, in place of the N17.61bn

Treasury bills actually sold, the

655% oversubscription is

indicative of a Naira liquidity

excess above N111.35bn in the

money market. It is inexplicable

that the related Treasury bills

rates were as high as between

9-12%, when in reality, there is

an undeniable Naira surfeit in

the system; surely tomatoes do

not cost more when the market

has an excess supply of


Instructively, nonetheless,

with the subsisting 22.5% Cash

Reserve Requirement for

banks, the N111.35bn liquidity

surplus indicated above will

translate to an oppressive

Naira excess above N400bn,

which invariably will propel

higher rates of inflation and

cost of loans while also

jeopardizing consumer

demand, economic growth and

job opportunities!

Worse still, with the

suffocating subsisting burden

of excess Naira liquidity, the

embattled fate of the Naira rate

thereafter, becomes sealed, in

CBN’s auctions of between

$200-$300m weekly to set an

exchange rate for the Naira, as

the subsisting Naira liquidity

surplus expectedly

overwhelms the small dollar

rations simultaneously offered

for sale by the same CBN.

Unexpectedly, nonetheless,

the more modest value of

CBN’s total forex sales, is

inexplicably popularly

presumed to be the main driver

of Naira exchange rate, even

when the total autonomous

component of forex inflow may

be equally significant.

Indeed, a cursory

examination of CBN’s forex

reserves, clearly indicates that

Naira exchange rate bears

minimal correlation with the

size of “CBN’s External

Reserves or forex sales;” this

means, rising reserves do not

translate to stronger Naira

rates! For example, in January

2012, Government’s Reserves,

was over $34bn, while Naira

exchanged for about N155/$1,

but unexpectedly, later

slumped, to N161=$1, even

when forex reserves rose well

above $43bn!

Similarly, in 2013, External

Reserves fluctuated between

$45bn in January to $42bn by

December, yet the Naira rate

remained sticky, between

N153-N162/$1. Furthermore, in

2014, the Naira rate also

weakened to N170-N199, even

when external reserves still

trended favourably between

$44bn-$45bn! Curiously,

however, when External

Reserves dipped below $30bn

in 2016, the Naira which, was

trading around N197=$1 in

January, was officially

devalued before December to

N305-N360=$1, while the

economy was, also officially

confirmed to be in recession.

Conversely, however, the

Naira rate in retrospect, was as

strong as N84=$1 between

1995-98, even when total

It is rather macabre

that, the CBN

willfully depletes it

stock of reserves to

defend the Naira,

through its regular,

weekly auctions of

hundreds of

millions of dollars

reserve was a very modest

$4bn. Similarly, between 1972-

1984, official forex reserves was

barely $390.71m but one Naira

exchanged for almost $2!

Instructively, since 2017

External Reserves have since

climbed above $40bn, but the

Naira rate, still appears

inexplicably stuck between

N305-N360=$1 even after

about 41 items were excluded

from forex sales. The obvious

question therefore is, if dollar

rate rose well above N300=$1,

because reserves dropped

below $30bn in 2015, why then,

has Naira rate remained static

between N305-N360, even after

reserves have climbed, once

again and remained stable

between $40bn-$47bn.

Although CBN’s

Communications Director,

Isaac Okorafor, indicated

exchange rate stability as

priority, rather than size of

reserves, invariably however,

rapid depletion of reserves

would perfunctorily precipitate

market panic and induce

further reserve erosion, which

could, ultimately, compel

another huge Naira

devaluation below N500=$1.

The social and economic impact

of such a rate will, inevitably,

fast track more Nigerians into

poverty, and sustain our

Nation’s odious title as the

reigning “World Poverty


It is rather macabre that, the

CBN willfully depletes it stock

of reserves to defend the Naira,

through its regular, weekly

auctions of hundreds of millions

of dollars, to all and sundry at

face value, while conversely,

Government simultaneously,

seeks dollar loans and pays

upto 8% as interest on such

debts despite CBN’s heavy

cache of idle dollars!

For example, the DMO has

lately (June 2019) confirmed its

intention to borrow $2.7bn from

foreign sources in 2019.

Nigerians must question why

the loan required could not be

obtained directly from CBN’s

caché of almost $50bn, part of

which CBN unilaterally

auctions against the Naira and

freely distributes sans interest

to even Bureau-De-Change,

who are probably the major

source of foreign exchange for

those smuggled goods which

continue to threaten Nigeria’s


The above title “The Wrong

Way to Defend the Naira” was

first published in April 2011 in

Vanguard Newspaper, to reflect

the perspective of the

contradiction of higher External

reserves while Naira exchange

rate, inexplicably, conversely,

remain sticky and under siege,

even when dollar reserves

exceed budget expectations.


3 African presidents to speak at TEF Entrepreneurship

Forum — Elumelu

By Cynthia Alo

THE Tony Elumelu

Foundation (TEF), Africa's

leading entrepreneurship

platform, has announced the

line-up of speakers and activities

for the 5th Tony Elumelu

Foundation Entrepreneurship

Forum, the largest annual

gathering of African


For the Forum's Presidential

Dialogue, the President of the

Democratic Republic of Congo

(DRC), Félix Tshisekedi, will join

President of Rwanda, Paul

Kagame, and President of

Senegal, Macky Sall, in an

interactive plenary session that

opens Day-2 of the Forum.

The Presidential Dialogue will

be moderated by TEF Founder,

Tony O. Elumelu, and will feature

all three the Presidents engaging

directly with an audience of

5,000, comprising of

entrepreneurs, policymakers,

investors and business leaders,

with thousands of people

interacting live online,


The Forum presents the largest

single annual opportunity for

entrepreneurs and policy makers

to interact directly and all

sessions at the Forum have

private sector and public sector

leaders anchor panel discussions,

master classes, and a dynamic

pitching competition that will

engage an audience of start-up

entrepreneurs, development

institutions and policymakers.

The speakers expected for this

year's Forum include Prof.

Benedict Oramah, President of

African Export-Import


Akinwumi Adesina, President of

African Development Bank

(AFDB); Dr. Awele Elumelu,

Trustee, Tony Elumelu

Foundation and Founder, Avon

Medical; Kennedy Uzoka,

Group CEO, UBA Group Plc;

Mrs. Djene Kaba Conde, First

Lady, Guinea; amongst other

notable global business leaders.

Every year, the Tony Elumelu

Foundation hosts the largest

gathering of African

entrepreneurs, policymakers and

business leaders in one location.

The fear of economic

contraction, increasing

joblessness and deepening

poverty expressed in that

article have all become

oppressively apparent. A

summary of that article follows

hereafter. Please read on.

“In practice, the Naira

exchange rate is actually more

a function of Excess Naira

liquidity in a strictly regulated

market in which small rations

of dollars are auctioned

intermittently by the CBN.

Regrettably, such a market

model will only spell disaster

for growth and deepen poverty

for our people.”

Specifically, the CBN

Governor, Lamido Sanusi in his

acceptance Speech as

Silverbird’s 2010 Man of the

Year, referred to IMF’s

recommendation for a devalued

Naira as one of such ‘bad’ or

anti-Nigeria recommendations

that pauperise our people.

Consequently, he rightly

refused to play along with IMF,

as he saw no observable

benefits in a weaker Naira,

which would “trigger higher

industrial production costs, fuel

inflation, increase fuel prices

and subsidies and increase our

national debt burden.”

“Undoubtedly, Sanusi’s

argument with regard to the

critical need for a stable naira

value appears more plausible;

but the real question is, can the

CBN Governor keep Naira

below N155/$1 within the

context of the present

framework that explodes Naira

supply whenever distributable

dollar revenue is substituted

with naira, in monthly

allocations to government?

This column has consistently

maintained that naira

substitution for dollar revenue

is the poison in our economy,

as it engenders a system that

cripples our economy and

oppresses our people

whenever we earn increasing

dollar revenue; a veritable

paradox if there was one!”


This year's Forum, themed

"Empowering African

Entrepreneurs", will take place at

the iconic Transcorp Hilton

Hotel, in Nigeria's capital city of

Abuja. The Forum will also

include the UBA Marketplace,

where UBA, Africa's global bank,

brings together businesses from

across the continent.

At the 2018 forum,

TEFConnect, the largest digital

platform for African

entrepreneurs was launched to

connect entrepreneurs to the

opportunities they need for



TEFConnectwill take centre

stage at this year's Forum as

global debates move to

technology as a key driver of

economic development in Africa.

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