Why we need a new CBN Governor
I think the CBN needs a new governor. Like yesterday.
It appears there is active manipulation going on to keep the Naira in the low N300s. The value in the parallel market, in the low N400s, is a better indicator of the Naira’s true worth. Whether it is due to their inability to educate or convince the Presidency or whether there is some ineptitude in the mix, I no longer trust the current leadership of the CBN to weather this storm.
Our best bet in the short term at strengthening the value of the Naira, other than an unlikely jump in the value of oil, is for foreign investors to return with their dollars. Forget all that talk about ramping up local production of non-oil goods. Making anything in Nigeria is incredibly expensive, and it will take years of concerted action on power, transportation, finance, labor (read everywhere) to create a significant base of export-worthy goods.
We have a lot of English-speaking people and a lot of raw talent, so another option is to ramp up exportation of services — but that’s a story for another day. Companies like Andela are leading the way here, but there’s a lot more that we can be doing.
Back to foreign investors.
If foreign investors do not trust the market is free of government’s sticky fingers, they will not bring their money back. They will go to other countries where they can better predict outcomes and protect their capital. We need foreign investors to bring their dollars back, so that supply of foreign exchange can rise towards demand and the scarcity can let off a bit. If the scarcity lets off a bit, the Naira will appreciate in value, although no one can accurately predict by how much. In addition to helping the Naira appreciate, their investment dollars will create jobs and help restart economic growth.
As a foreign investor, I’m not going to bring my $1M at N310 when the CBN can cough tomorrow and the rate will jump to N400. My $1M will become $775,000; just like that. Technically this kind of devaluation can happen despite your best efforts, but the Naira is in a very unpredictable place right now. To make matters worse, the CBN told the world we were floating the Naira — then turned right back and tried to prop up the value at N280, and has now moved to ~ N310.
We need to move quickly to a new CBN governor who inspires confidence in investors, actively influences fiscal policy, and is firmly in control of monetary policy. I don’t know exactly what the CBN should be doing, but trying to prop up the Naira artificially should not be part of their work.
“You have sat too long for any good you have been doing lately… Depart, I say; and let us have done with you. In the name of God, go!” — Oliver Cromwell.
PS: These opinions are solely mine. I do not speak for any person or institution.