Respected lawyer and former President of the Nigerian Bar Association (NBA), Olisa Agbakoba (SAN) has outlined what he believes to be the best course of action in solving Nigeria’s foreign exchange challenges.
In an interview with Vanguard published on Sunday, focused mainly on the economy, the senior lawyer spoke about devaluation.
He said: The devaluation debate has really caused a big problem in the country, that everybody claims to understand the debate. The fact is that investors would not come into the country, if they feel the naira is being held down. Although the President has said that he won’t devalue, the fact is that we already have devaluation. Looking at the exchange rate of the pound to the naira, as well as the dollar to the naira between two years ago and now, we will understand that the argument should not be about devaluation. Rather, it should be about revaluation of the naira.
The naira requires to be revalued. In revaluing the naira, all Nigerians would agree that we want to see the naira stronger. The CBN super-regulation of the naira-dollar parity is not ideal. The CBN has no business trying to shore up the dollar against the naira. This is the first mistake.
The second mistake is the CBN’s creation of an official window for forex, as if they are the only ones whose contribution matters in ascending the forex. The President said correctly that if you want to school abroad, you must be ready to foot the bills, because government can’t support you. I wonder why that error is being made. The general principle of foreign exchange reserve is that everybody puts its hands in the basket.
For instance, Dangote is going to have his refinery on stream in 2017/2018 at Epe area of Lagos State. He (Dangote) is not going to sell his product in naira but in dollars. I, as a lawyer, will also have the possibility of earning in dollars, but I am excluded from the window, because I am not a trader. The only traders are the licensed banks, or the Bureau De Change (BDC) operators. This act makes the black market to thrive. People now go to the black market because they want to make profit.
So, the correct approach is to abolish the official window and allow all Nigerians, in public and private sectors, to harness the resources. For instance, China that has over $1 trillion in foreign reserves, it is not government’s money, rather, it is the money collectively generated by the national resources of China. In that way, the pressure of the dollar on the naira will lower.
Also, if you go to the United Kingdom, you can go to the money shops to buy foreign exchange. Nobody is going to ask you, do you have the Bank of England license? This, I think, is the way to reflate. If we revalue the currency, Nigeria will definitely be an attractive destination for investment.