A few days ago we put up a blistering article from Bloomberg which suggest that they want Nigeria’s GDP growth rate to stall to teach the likes of Emefiele a lesson. The Economist ratcheted up the rhetoric delivering their own piece of blistering attack on the current government and its policies.
In an article titled “Hope the naira Falls” the economist is also hoping that it will teach Buhari a lesson. In the article they compared Buhari’s actions to the current economic situation to his reaction in the early eighties when he was miliary head of state.
Muhammadu Buhari, a former general, has not had much luck when it comes to the oil price. Between 1983 and 1985 he was Nigeria’s military ruler. Just before he took over, oil prices began a lengthy collapse; the country’s export earnings fell by more than half. The economy went into a deep recession and Mr Buhari, unable to cope, was overthrown in a coup.
The article ripped into Buhari’s decision to peg the currency instead of devaluing because of what they believes is “loss of purchasing power”.
Instead of letting the naira depreciate to reflect the country’s loss of purchasing power, Mr Buhari’s government is trying to keep it aloft.
The article even went as far as saying that the CBN banned the import of a “long list of goods” whereas all the CBN did was to restricting importers of 41 items from accessing its forex window. The CBN did not ban importation of these items.
The central bank has restricted the supply of dollars and banned the import of a long list of goods, from shovels and rice to toothpicks. It hopes that this will maintain reserves and stimulate domestic production.
They then go on to mention that factory bosses are complaining that they cannot import raw materials due to the restriction, forgetting to mention that there are also some who have thrown their weight behind the CBN’s decision.
Factory bosses complain they cannot import raw materials such as chemicals and fret that, if this continues, they may have to shut down. Many have turned to the black market to obtain dollars, and are doubtless smuggling in some of the goods that have been banned.
Like we mentioned previously, foreign investors (portfolio investors in particular) are unhappy about the CBN policies because it means they cannot invest in the economy especially as stocks are quite cheap. The longer the CBN delays this the more attacks Buhari gets.
Get the link to the article here