$5,000 ‘gift’: Abuse of the naira|Sherrifdeen tella
I have always thought it was an exaggeration when I heard that politicians distributed dollars to delegates at their party primaries. The alleged distribution of $5,000 among legislators penultimate week for “salah” or bribe to support the River State emergency rule declared by President Tinubu has finally nailed the naira’s coffin. This indicates that both the executive and the legislature have lost confidence in the domestic currency. The executives believed that paying the legislators in the naira equivalent of $5,000 would not have the desired effects for immediate approval of the emergency rule. They decided to allegedly dollarise the bribe, or was it a ‘gift’? It was a most effective weapon of cooperation, compromise and compliance. Yet, it was thoroughly an economic devilry on the naira.
No legislator came out to condemn the emergency rule in the River State! The alleged dollar rain has sealed their lips. As we mock such a group of people in the Yoruba language, “They have eaten dodo (fried plantain) and cannot speak òdodo (truth).” It was a corruption enthronement. But corruption has always been part of Nigerian politics. One can recall the recurring issue of the Third Term agenda in the Fourth Republic, where lots of underhanded exchanges of funds were offered and accepted. At that time, it was naira. Probably, if it were foreign currency, it would have sailed through easily. We have to start thinking of how to kill any move for a third term in this dollarised political system. I am just hoping that the parliamentary system being worked upon currently in the National Assembly will not result in a tenure elongation through some smuggled provisions for the amended constitution in the proposal. Let us keep our eyes open because corruption is now at another level.
Politicians feel they have the latitude to do whatever they like with countries’ resources, caring less about the socio-economic implications of their actions. Even sociologists and economists among them lose their bearings when it comes to money matters. That is why I often say that political expediency always overrides sound economic judgement. As far as the Presidency was concerned, the money was well spent. No one asked questions: Do we mint dollars in Nigeria? Can anyone legally spend dollars in the Nigerian market? Are there laws that ban the use of foreign currency for transactions in Nigeria? Did the Presidency’s action violate that law? If it did, could anyone be charged and eventually jailed?
I like the way Yoruba newscasters read cases of naira depreciation. A newscaster would read, “Naira dobale fun dollar in òja agbaye.” A literal translation would be “Naira prostrates for dollar in the international market.” One of the acts that gives rise to idobale is this presentation of a gift or bribe in foreign currency. The law of the land prohibits the use of foreign currency to settle transactions on Nigerian soil. Negotiation to approve an action like the River State case is a transaction in an economic and accounting sense. Fortunately, our President is an accountant, our CBN governor and the Minister of Finance and Coordinating Minister of the Economy are economic and financial experts, and our Attorney General and Minister for Justice is a learned gentleman.
One expects these categories of people to have weighed the implications of that transaction on the economy and the law. To me, an infraction, abuse of the naira, has been committed by the alleged act of paying legislators dollars either as a gift or an incentive for a job to be carried out, and the law must take its course. Well, that aspect is left in the hands of the legal citizens. I am still hoping to obtain a Unified Tertiary Matriculation Examination form for legal studies!
From a purely economic angle to the whole saga, the alleged action will depreciate the naira, increase our debts and debt burden, affect the development of some sectors of the economy, and further pauperise the populace. Let us take the cases one after the other. Let’s assume that, on average, all the legislators allegedly took the same amount. In practical terms, the NASS officers, by categories, would be given a higher amount such that the Senate President would have allegedly received a minimum of $20,000 while the Rt. Honorable Speaker could allegedly take $18,000, and it goes down like that with a senator getting something higher than a representative, who allegedly got the minimum of $5,000.
Naira gains against dollar in official market, trades at N1,536.82
Based on the $5,000 flat rate, the amount involved in the alleged corruption saga totals at least $2,345,000, considering there are 109 members in the Senate and 360 members in the House of Representatives. If half of that money was converted to naira by some of the legislators to meet domestic obligations, it would seriously affect the value of the naira. There will be pressure on the exchange rate. The conversion would naturally be carried out in the parallel market. That could be why the naira was seriously depreciated the following week when the CBN said it was looking for some currency speculators. The alleged largess was largely responsible for the depreciation or prostration of the naira before the dollar. CBN does not need to look further.
Secondly, the alleged distributed dollars must have been taken from a project fund. The CBN does not print dollars. It receives foreign currencies from international creditors or for foreign transactions. It is not uncommon for governments to receive loans for one project and divert them to other programmes or projects. I recalled a state that obtained a loan for a mega park but used the funds for a failed election. So, the success of the project the shared fund was meant for is already jeopardised, and the sector or sectors that could benefit from such projects would lose out. The debts will still be serviced and paid while international credit mismanagement continues.
Now that the government has allegedly started its ‘gifts’ in dollars, the legislators will likely not be willing to get future ‘gifts’ in local but foreign currency. Is this the beginning of the end of the naira in official transactions? The naira will be the worst for it, and the current hyped economic growth and development will remain an illusion because a weak currency portends a bad omen for domestic and foreign direct investments, even for portfolio investments.
In this past week, I have had an opportunity to examine the thesis of some postgraduate economics students and the outputs of many of the students (supported by attendant viva voce or interview), showed clearly from the empirical results that our external loans have not had positive outcomes on the economy, either in the short or long run. One of the students wrote on the outcomes of the Anchor Borrowers’ project and found that it was successful in the short run but not in the long run. The result was in tandem with some past studies that such programmes have no long-term benefits for economic development. The conclusion I drew from the results of most of the studies, particularly those involving foreign loans, was that the loans were largely mismanaged but must be repaid with interest.
The CBN has been quite loose with the management of foreign currencies in its care. The money that is not available for importers of raw materials is found in freshly minted form in the hands of black-market currency traders and private vaults of politicians. If an importer who has domiciliary accounts to manage his business proceeds needs foreign currency to meet some operational obligations, he will be disappointed by the banks, while every legislator travelling abroad, and they travel all the time, easily gets more than the basic travel allowance for leisure! Do not be surprised when you see dollars, euros and pound sterling being sprayed in politician-organised parties without arrest. You will then be told that it is not naira abuse since the law is for naira, not for foreign currencies!
The alleged action of the dollar ‘rain’ has added another insult to Nigeria’s well-being and credibility by our leaders. They must start making amends. They send their children abroad for studies because our educational inputs are of low quality, producing low-quality outputs. They patronise foreign hospitals whenever they are sick because our medicare is at a pedestrian level compared to the quality in other countries. And now they are discrediting the naira before the dollar. May naira do not have prolonged idobale before the foreign currencies.
Credit:Punch