The Central Bank of Nigeria has been under intense pressure to devalue the Naira. This pressure has been on since the new government took over and has only intensified following the circular recently released by the CBN banning importers from sourcing forex in the official market for a list of 41 items. This led Western Publication, the Economist to write an opinion piece that suggested the CBN led by GodwinEmefiele was out of touch with reality and should perhaps be sacked. The CBN of course responded in like fashion. This makes me wonder. why devalue? Even if we are to devalue the Naira by what percentage? Another question that crossed my mind was why is it Western Media asking us to devalue. I have asked Economist these questions and none of them have been able to come up with a logical response. Devaluation in my opinion is not market driven and as such as I see no reason why this policy should be pushed. If what we want is a more market reflective value of our currency, then what we should be pushing for is a free float of the currency. The problem with devaluation is that, no one truly knows by how much the Naira has lost or indeed gained in value. With a free float, market activities determine the real value of the Naira and the CBN can well regulate it to ensure arbitrage and other market infractions are eliminated.
2. Subsidy removal
This is another policy many have ironically been pushing for. Just 3 years ago, many took to the streets when the government let by immediate past president,Goodluck Jonathan had announced a massive reduction in subsidy. Today, everything seems to have changed as more analysts now believe subsidy should be removed.
What I however don’t get is what has really changed between now and 2011. We still import Petroleum products and our Refineries are yet to be back on stream in full capacity. The government has also not shown any signs of being able to combat corruption and neither are they willing to make the same sacrifices they want Nigerians to make. There is also no proof that oil marketers have the capacity to keep up with demand a situation that might more than anything introduce scarcity increase prices artificially.
3. Vehicle Policy
The motor vehicles policy introduced in the Jonathan Government by Olusegun Aganga is one of those policies that I feel is dead on arrival. Just like many before it, the policy sounds nice on paper but never practically possible to implement. The government has gone ahead to increase duty on motor vehicles in the hope that it will create a demand for made in Nigerian vehicles. Unfortunately, they forget as usual that the economics of manufacturing in Nigeria is not only about taxes and duties. Manufactures still have to face a steep learning curve before they can meet the taste and fashion of Nigerians who have for years been used to assorted vehicles imported abroad. Rather than focus on transportation, haulage, security, motorcycles, tricycles and other areas where vehicle need can still be met by a local market, they want to start with the salon cars. The policy will not stand the test of time in my opinion as we are far behind in terms of competitiveness and consumer taste. The world is shifting towards electric-powered cars and less fuel powered vehicles. It’s hard to see us score any big wins here. Nigerians are already suffering with the cost of vehicle imports sky rocketing. To show you how confused the government is, they have repeatedly postponed the full implementation of the full vehicle tariff. 35% tariff which was meant to be implemented July 1 has now been postponed again.