ECONOMYTOP STORY

Idika Kalu reacts to consistent Naira decline

Renowned economist and former Minister of Finance, Dr Kalu Idika Kalu has reacted to the spate of depreciation of the nation’s currency which traded at N400 per dollar on Friday.

In the comment he pastes on his facebook page at the weekend, he lamented that Nigeria did not make use of the opportunity presented before it when the Managing Director of the International Monetary Fund (IMF) Ms Chrintine Lagarde visited the country.

He is of the view that the country could have negotiated with the organisation to cover up to 80 per cent or even 85 per cent of the projected revenue impact from the over 70 per cent decline in the nation’s oil price.

He lamented further that the nation is still in the same position it was years ago, adding that instead of the Naira improving in its relative value from the onset of this administration, “we have watched, seemingly helplessly, using trial and error fiscal and monetary policies, mostly draconian and flagrantly against the run of market conditions, resulting in the drop from about 197 to now 400 in the value of the Naira in relation to the Dollar”.

The text read thus:  ”There was a recent comment in a Nigerian internet forum on the further depreciation of the Naira to 400 to the Dollar and 510 to the Pound and the prospect of even further declines.

”It is rather distressing that we have opted to repeat the mistakes of thirty years ago. When Largarde visited very early in this administration, it was plausible that Nigeria, through negotiations with Fund, could cover up to 80% to 85% of the projected revenue impact from the over 70% decline in the oil price. With additional resources from such other institutions as the World Bank and the ADB, as complement to Nigeria’s own resources, we should have managed to keep the equilibrium between the demand and the supply of foreign exchange in 2016.

”This will not only have prevented the precipitous drop in the Naira exchange rate, but could even have strengthened the Naira by improving our reserves level as oil prices improved moderately, and as recoveries from looted funds, gains from the single treasury account and other fiscal changes took effect.

”By adopting the policies we’ve been following, we have unduly constrained the availability of foreign exchange, put pressure on domestic prices as inflation has increased, and have limited the capacity of the real sectors to produce and create jobs. Furthermore, the cost of capital , the rate of interest has gone up, limiting both the volume and increasing the cost of credit to all productive sectors!!!!

”What needs to be noted is that as long as these policies are not changed, there is no guaranteeing any finite level of depreciation of the Naira value with respect to any of our trading currencies. We should realise that it is for the purpose of addressing these unexpected deep and sharp decline in export commodity prices that these facilities were set up in the first place. This is the primary substance of the discussion that Largarde expected to have with the new administration. Rather, we were “happy” to observe that she said she did not come to give Nigeria any loan.

”This is the same position we were thirty years ago!!!! As a result, instead of the Naira improving in its relative value from the onset of this administration, we have watched, seemingly helplessly, using trial and error fiscal and monetary policies, mostly draconian and flagrantly against the run of market conditions, resulting in the drop from about 197 to now 400 in the value of the Naira in relation to the Dollar. Even with the continuing uncertainty, it appears that government is not disposed to considering alternative policies.

”The sheer volume of such capital assistance is indicative of the normal use of such funds by many countries both developing and developed. The IMF alone disburses about 25 billion Dollars annually. These funds are designed to bridge the resource gap such as the one the Nigerian economy is currently facing. These funds are invariably very concessionary in their terms e.g. low interest, adequate grace period, and long term repayment.

”As a consequence of such low conditions, such funds are in fact usually rationed among member countries. It is not true that the financial institutions “push” such loans. The real issue is that they are provided under the condition or the so called conditionalities that the recipient member country will dutifully implement the remedial policies that would correct the domestic imbalances that created the need for such request for assistance in the first place. The need for CHANGE is self evident!!!!!!” He concluded.

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