Dear Future President,
Trust this meets you well. Sorry to interrupt your busy campaign schedule but the purpose of this letter is to discuss a few things that are cogent to the tasks ahead as President. Let me skip the pleasantries because nothing is pleasant at the moment. Have you heard our debt payments now exceed revenue? It’s paradoxical that when the country’s richest commodity is in the high-price territory, we still cannot service our debt. Also, have you heard our Excess Crude Account is now less than half a million dollars? What are your plans to fix this anomaly? Because the global oil market is saying we are still going to have higher oil prices as Russia does not plan to end the crisis in Ukraine.
Speaking of crisis, the exchange rate has been on a downward spiral of late. It has been the major talking point in the country. Did you read Agusto’s note? I read it, and he advised that Nigeria should operate a “crawling peg” to effectively manage the exchange rates. What do your economic advisers think about this? There are a few recommendations I could share based on every stakeholder’s analysis. Some have called for the “outright ban on retail domiciliary accounts” as speculative demand from Nigerians has weighed on the strength of the naira.
Everyone is dumping naira investments and the currency as a whole for dollars. A bit draconian to eliminate retail dorm accounts as data shows it only accounts for $4 billion of the dollars in the country. Corporates own about $12 billion in a combined $16 billion balance in domiciliary accounts across the country. Another stakeholder, the CBN, has said no one should blame them as it has gotten “zero-remittance” from NNPC this year and it cannot print dollars, NNPC countered that claim by revealing they have remitted $2.7 billion from January to June. Now, the back and forth between both agencies point to the fact that Oil accounts for 80% of all the dollars that come into the country. However, almost all the dollars brought in go back out to finance subsidy payments. Now we have petroleum imports costs exceeding oil exports. This is the main issue. Do you want to remove subsidies and risk losing your legitimacy as fuel prices will rise higher and affect the citizens?
May I submit a suggestion? First, we need to produce more as a country. We need to also end oil theft so that more dollars can come in. And most importantly, we need to take off subsidies and direct the money made from oil to fix Nigerians’ main problem- food. Food accounts for 60% of what Nigerians spend their income on. The Minister of Finance has said, how many people even use fuel in Nigeria that we are jeopardizing the country’s economic status with incessant subsidy payments? But everyone eats. We need to make data-driven decisions. Strive for food sufficiency and forgo fuel. On the monetary policy, let us have one exchange rate. It would kill arbitrage and round-tripping – meaning that there will be no incentive to hold on to dollars unless for transactional demand.
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The exchange rate will be determined by willing buyers and sellers – if it goes high, it would scare away speculators. The rates will eventually come down because of the concept of “demand destruction”. Demand destruction postulates that the only thing that can bring down high prices is higher prices as people will get priced out eventually which will reduce demand which consequently leads to the fall in price. Now how do we handle the dollars in corporate and retail hands? We borrow a leaf from Russia. Have you noticed that the Rouble despite all the sanctions has survived and gained strength? Its because the Central Bank of Russia introduced capital controls. Russia had a mandatory rule for export-oriented companies to sell as much as 80% of their forex revenues at home. That is by law asking all exporting companies to convert 80% of all her dollars for Naira. Providing liquidity and strengthening the home currency. We should adopt this with plans to ease controls as circumstances change so we would not suffer the “negative effects of a stronger naira”.
Speaking of Russia, we are in a global oil crisis. Diesel has gone up, Jet A1 fuel has gone up. Travel from the economic capital to the political capital costs north of N100,000 – 300% of the monthly minimum wage. If poor people cannot afford air flights, then they should travel by road? Right? But sir, it’s just that road travel is not safe anymore. Don’t you think it’s high time we man our highways and railways with security personnel and surveillance? I know you would say it’s practically impossible to man roads stretching to thousands of kilometres, but forgive me to assume we could because currently out of the 370,000 policemen we have, about half of them escort VIP and the elite. No possible way we are under-policed and that luxury exists. The insecurity in the country affects businesses, tourism, and even agriculture.
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Sir, your job is the easiest and in the same vein the hardest in the world. Easiest because our issues are interrelated, because fixing one problem can fix other problems. For example, tackling insecurity – at our pipelines (improves our oil earnings and brings about investment from IOCs), addressing general insecurity, gives farmers the room to produce more food – which helps productivity, GDP, and food sufficiency. Fixing power will give local businesses, an incentive to produce more and compete with foreign imports, eventually winning that battle and reducing dollar demand. Fixing power also would mean people will not rely on fuel to power their homes and businesses. Your job is the easiest because no one is asking you about climate change, LGBTQ+ rights, or abortion rights as discussed globally. Just making food cheaper for Nigerians, bringing their cost of living down, and creating an enabling business environment that solves unemployment would solve the majority of Nigeria’s problems.
The job ahead is the hardest because you do not have the magic wand to do all that is written above. It requires collaborative efforts from all tiers of government and the trust of Nigerians. The trust between Nigerians and their leaders has evaporated. The bridge is burnt and the ship has sailed. Nigerian leaders will forever be viewed as corrupt and personal-interest driven – you have a lot to do to build that bridge back. That begins with your campaign. Campaign on how you will solve issues. Campaign on how you can address our unbridled population growth, campaign on how you can get Nigerian women to be educated and contribute productively to the economy. Ignore those stoking ethnic and religious sentiments. 4 out of 10 Nigerians are poor. That is what matters. Poverty does not respect any tribe or religion.
Hope you get to read this and if you don’t, hope one of your advisers will. Best of luck in your campaign.