Adebayo Adeolu, political scientist, lawyer and public affairs analyst, blames the economic recession in Nigeria on Emir of Kano, Muhammad Sanusi II, accusing him of laying the groundwork for the menace while he was Governor of the Central Bank of Nigeria (CBN). He also seeks emergency powers for President Muhammadu Buhari to tackle the situation. He speaks with CHUKWUDI NWEJE.
Nigeria is officially in recession. How did we drop from being the largest economy in Africa to recession?
As far as I am concerned, the problem started during the administration of former President Goodluck Jonathan. LamidoSanusi started the whole thing while he was governor of the Central Bank of Nigeria (CBN). He was complaining of dollarisation of the Nigerian economy, that people were spending the United States (U.S.) dollar everywhere and that at the end of the day that the dollar would strangulate the naira.
That was a wrong diagnosis. At the exchange rate of N150 to $1, which we had at the time, the official rate was about N110, if people paid $10 for goods in the shop, it was still be N1,500 at the exchange rate. Therefore, whether people spent dollar or naira did not really affect the economy of Nigeria.
What Sanusi caused when he insisted that those who received money transfer via Western Union should not be given dollar but the naira equivalent was that he discouraged Nigerians living abroad from remitting dollar to their relatives at home. Before that policy, Nigerians abroad had remitted over $12 billion officially to Nigeria. The implication was that apart from the money from oil, Nigeria got $12 billion annually from these remittances.
How did the policy hurt the economy?
From a remittance of $12 billion annually through Western Union, Nigeria now only gets $2 billion; $10 billion is missing. Some people at the CBN are stealing the money because when they give the recipients of the Western Union transfer their money at the official rate, they hold unto the difference between the official rate and the black market. They use this difference between the official rate and the black market for round-tripping. It has discouraged those abroad from sending money because they know the CBN is robbing their relatives of their hard-earned money.
You must understand that when money is sent from overseas, Western Union takes a percentage and the Nigerian bank, through which it was sent, also takes a percentage. This builds lots of money for all the banks in Nigeria and the money so accumulated cushions the effect of the drop in the price of oil. It serves as a buffer.
Before General Ibrahim Babangida devalued the naira in the late 1980s, naira was stronger than the dollar. The naira and the British pound sterling were equal and there was no sense in people abroad sending money to Nigeria. In fact, those abroad used to ask their relations back in Nigeria for money. Now it is the reverse.
Nevertheless, that devaluation by Babangida was the wisdom of Joseph, because he saw that recession was coming. Though it was a Structural Adjustment Programme (SAP), a recommendation of IMF and World Bank, the devaluation worked as a miracle for Nigeria. When Babangida devalued the currency, people started leaving Nigeria for overseas in droves to work and look for the ‘almighty’ dollar. When they got the dollar, they sent it back home and built a better life for themselves.
The devaluation was what kept Nigeria from imploding into what happened in Egypt and Tunisia. Although people were not working, they relied on their relations overseas.
When Babangida left office, and the exchange rate was N28 to $1, more people were leaving Nigeria to work abroad. Even professors went abroad to work as security men; some taught during the day and did security duties at night.
Overtime, successive governments have been devaluing the currency. Ernest Shonekan devalued it to about N40 to $1, Sani Abacha to N80. Under Olusegun Obasanjo, it was devalued to about N150 and it remained there for a long time until it was devalued again and it went so high.
When Nigeria was earning as much as $100 per barrel from crude oil and politicians were stealing the money, the country did not implode because Obasanjo managed the economy.
UmaruYar’Adua/Goodluck Jonathan administration did not manage the economy well enough. What kept the country afloat was that Nigerians abroad were sending money from overseas.
Western Union was a booming sector and people used the remittance to feed themselves. It was like another government for the people, creating employment. Those overseas sent cars, refrigerators and electronics and those at home were trading and making money.
Now, you have restricted the amount of money you can bring into or take out of the country. The policy has its own advantage of checking looting, but when those overseas remit dollars and you give their relations in Nigeria naira at the official rate, which is far lower than the black market, what you are doing is that you are stealing their money. The difference between the official rate and the black market is what you are stealing.
All the time the price of crude oil was fluctuating; the remittances from the Western Union acted as a buffer and kept the economy afloat.
When Sanusi introduced the policy of giving recipients of money transfer naira, he killed that sector of the economy. Sanusi’s argument that the economy was being dollarised was untenable because in other parts of the world, shops collect money in foreign currencies.
They collect euro, pounds and dollar because they know these currencies are stable. Foreign currencies should be allowed in Nigeria because it makes forex available. Apart from the forex coming from the CBN and crude oil sales, the Western Union provided another legitimate source of foreign exchange coming into the country.
You mean devaluation helped Nigeria’s economy?
The time Babangida devalued the naira, it was the wisest decision he took. However, devaluation should not be continuous. You only devalue to a point and when situations normalise, you revalue the currency again, to what it used to be. Other countries devalue when they feel that the exchange rate is not favourable to their economy and they want prices of goods and services to be cheaper.
Countries that devalue are western countries that are production-based and have cheaper labour rates. When they devalue, it encourages them to produce more, and when they export, they earn more foreign exchange.
However, for Nigeria that is not production-based, devaluation will be detrimental to the economy. If as a non-production-based country, we must devalue, and it should not be so much. If we continue to devalue every time we have problem with the price of crude oil, the economy will crash.
Will allowing the free flow of foreign currency not weaken the naira?
No, it does not. Look at the situation now. The price of crude oil has dropped in the international market. There is scarcity of dollar and airlines are closing shop because they do not have access to dollar. It is not even available in the black market.
However, the money that came from Western Union came in dollars not through oil, but through labour. Doctors and other professionals went abroad to work and they remitted the dollar they earned into the Nigerian economy.
If that $12 billion had been coming, the Bureau de Change will have forex whether the CBN releases dollar or not.
What about the brain drain the quest for dollar caused?
The brain drain is an advantage to Nigeria because the people working abroad remit foreign exchange to the country. This means that even without exporting anything, Nigeria earned foreign currency through people’s labour. Though many professionals left the country to work abroad, they remitted their earning to Nigeria and the money they remitted came from the economy of Europe.
The World Bank supported what Sanusi did because it stopped the foreign currency that came out of their economy. Now the money remitted by those abroad has dropped and remained in the economies of the western countries and will be used to boost their economy.
The CBN recently licensed 11 new International Money Transfer Operators (IMTOs)
Licensing new money transfer operators will not make forex available if Nigerians abroad do not remit dollars. Nigerians abroad are not remitting money because they feel cheated.
The solution is that money transferred to Nigeria should be given to the recipients in the currency it was sent. It is only in Nigeria that when money is sent, the CBN will insist on paying it out in the local currency. In other parts of the world, when money is sent to you, the bank will ask if you want the foreign currency or the local currency. If you want the local currency, they give it to you at the correct rate because there is nothing like black market.
So where did the black market phenomenon come from?
Black market is a Nigerian thing. It is just like the selling of crisp naira notes at public functions. Till date, no CBN governor has been able to stop the selling of naira notes.
In the 1970s, you would get new notes in the banks; but today, you hardly get the new notes in banks, but they are sold at parties. It happens only in Nigeria. It is a cartel on its own run by somebody at the CBN and no CBN governor has been able to stop it because the interest is better than you can get in any bank. When you take N1,500 from every N10,000, it adds up to a whole lot of money.
Has the low price of crude oil anything to do with the economic situation in the country?
The price of crude oil has gone down to $30, but that should not throw Nigeria into recession. From the time oil was discovered in Nigeria, the highest the price crude had ever gone was $40 per barrel and that was a windfall. The average price of crude oil revolved between $10 and $15 per barrel. It was during the Iran/Iraq war that the price shot up to $30.
WhenAbacha was in power, how much was the price of crude oil? How much was it under General Abdulsalami Abubakar? The price of crude oil was about $15 when Obasanjo came to power in 1999, so why didn’t they devalue the currency then? The currency was not devalued because dollar was coming from abroad.
Nigeria has the highest population in Africa and we also have more Nigerians overseas than any other African country. We are over 200 million. Officially, we are about 170 million, but what about Nigerians living abroad, who counted them? There may even be many more of them abroad, but because they are living there illegally, they are hiding. It was the money remitted by these Nigerians that kept the economy afloat.
When Obasanjo got to power, the price of crude oil kept rising until it got to $100 and Obasanjo managed to check corruption and save. It was when he saved up to $40 billion that he was able to pay off Nigeria’s debt and got debt relief. By the time he left office, he still left external reserves of $60 billion for UmaruYar’Adua. Between Yar’Adua, Jonathan and Muhammadu Buhari, the external reserves depleted to $25 billion. That means the money has been stolen and Buhari doesn’t have powers to recover the money because people are using the judiciary to frustrate him and that is why he is asking for emergency powers.
Do you support the emergency powers for the president?
People are using the judiciary and the laws to frustrate the anti-corruption crusade. If there is enough evidence that somebody has stolen money, there is no need for the Economic and financial Crimes Commission (EFCC) to waste time in the court. All you need is to confront the suspects with evidence and make them return the money. If they refuse, they should be put in prison.
If we are talking about fighting corruption through democratic processes, it will never work because the National Assembly has made laws to incapacitate tackling every act of corruption they perpetrate in the National Assembly process, which is why President Buhari is asking for emergency powers.
The President needs emergency powers so that, for example, he can slash the salary of the legislators. The legislators have said they will resist any bill suggesting that they should be paid as they sit or on part-time basis. With emergency laws, the President will be able to work more assiduously.
There are agitations for the swop of Boko Haram suspects for the Chibok Girls. What do you think?
There is nothing to swop there. If you swop the Boko Haram suspects, how are you sure you will get majority of the Chibok girls? If you swap them and get the Chibok girls, how do you know they will not go and kidnap other girls? If you release the Boko Haram suspects and get the girls, and the terrorists now go and kidnap other girls, what will the government do? Start to re-negotiate for the release of the new girls again?
We have the Boko Haram suspects on the ground now. What the government should do is to grill them and find out who their sponsors are. The U.S. has said the sponsors are within Nigeria. The government should extract the information from the suspects and solve the problem finally and stop the military operations against Boko Haram. Now the whole of the North East have problem of internally-displaced persons (IDP) with people living in refugee camps. As long as people are in IDP camps, you have not solved the Boko Haram crisis.
If the government wants to end Boko Haram, it already has many of them in detention. The detainees should be grilled until they name their sponsors. That is the only way to end terror. The U.S. grilled the al-Qaeda suspects they had at Guantanamo. That was how they were able to get Osama bin Laden. The federal government should do the same with the Boko Haram detainees until they name their sponsors.
Do you support the clamour for restructuring?
When you say restructuring, restructuring in what area? Restructuring is not the problem of Nigeria, though we could restructure. Are they saying that the county should return to the regional structure, where every region controlled its resources and contributed to the centre? That is what they are calling for.
Yes, the federal government has too much powers; but the federal government is not stealing all the money. The money is stolen mostly by the state governments. When the governor is given security votes, ecological funds and so on, what do they do with the money? The government does not give anybody palliative.
Some will argue that there is no fiscal federalism, that Nigeria is not practising real federal system. You cannot copy America’s federal system to the letter. Nigeria has to tailor its federal system in a way that suits the country.
Nigeria’s problem is not in the structure of the country. The problem with Nigeria is that some people feel that they are superior to others. There is injustice whereby some people are unfair to others.