By Taiwo Olanegan.
We are experiencing a brand new thing. And beyond the hue of politics of the season, l advise that you get education and be prepared for the necessary shift ahead. Naira is speedily gaining weight against the Dollar; l am glad but not excited. Don’t think there won’t be consequences.There would be pleasant and unpalatable ones too depending on your side of the room divider. When you are in an economy, you bother less about the politics of the leadership. Your self preservation, interests, investment, savings and property are paramount. It’s a capitalist mindset. But shouldn’t we all be?
Increasingly Naira gain would produce new buyers – sellers millionaires and open up cheaper opportunities for travel. What took you ₦1m to do last December may cost only half the cost in August. We are moving back to the times when ₦5m would sponsor you to start a UK degree. I am not hopeful but I speak the language of data. Succinctly, below is a highlight on why Naira would be firmer.
One, Gov Yemi Cardoso is a more disciplined banker and regulator than the former holder of the office. Arbitraging and roundtriping on forex and phoney cash interventions is no longer an open shop within the CBN. In fact you could walk up to a BDC today and get your bta/pta tomorrow. Once the false pride of purchasing or holding a commodity is removed, the allure to hoard is defeated. The speculator market for Dollar is closed, at least for now.
Two, Nigerian banks have been told to recapitalize within the next 22 months. They would need ₦4Trillion to do. But the CBN had tied the hands of Boards of banks from using their reserves or retained profits to capitalize. Cardoso blackmails them to go source for new money. That ₦4T was worth $2.4b in February 2024. But with this fattening Naira gradually soaking in more cholesterol to attain ₦600 :$1 in the weeks ahead, when the banks eventually hit the roads of America, Asia and Europe to raise equity funds in 2025, láìgbé, láìsọ̀, our banks would bring some $5b cheap money from overseas to the purse of the CBN. God keeping us, l would remind you of this line in 2025 when it happened.
Three, Dangote Refinery, Port Harcourt Refinery, Warri Refinery are the legacies we would remember Muhammadu Buhari for despite his sins. The former president saved us from wasting $20.7b annually on petrol products imports, and onwards we would even earn more forex from export of fertilizer and allied petrochemicals. Fuels ($20.7b) and wheat ($3.4b) are our major imports, but henceforth, as from 2025 – 2026, our balance of trade would grow in a positive curve. You know the media miseducated us that Nigeria is an import dependent nation. A fat lie as usual. How can we be import dependent when we lack factories to process raw materials and our disposable income is terribly low to afford overseas goods. The only imports we do is garri and beans into our stomachs. And that’s why prices of both refused to come down inspite of Naira gain.
Four, Cocoa is $10,000 per mt because of the black pod disease ravaging Ghana and Ivory Coast. Nigeria exports 250,000 mt yearly. If price remains stable for 2024 – 2026 trading seasons, Nigeria would earn $5b from agricultural exports, solid minerals and other trades. It hasn’t happened since Lord Lugard. Now it seems the heavens are smiling on us.
Five, If Tompolo and Asari Dokubo continue their friendship with Nuhu Ribadu and romance with President Bola Tinubu, oil theft in Niger Delta would significantly reduce and our output would grow from current 1.5m per day to 1.8m. And that is the jackpot President Emilokan is waiting for. With crude oil bubbling to $100 per barrel, and our oil for loan agreement made with creditors by Buhari terminated, the CBN would be awashed with Goodluck Jonathan years volume of Dollars. This also is not a prediction. It’s a factual truth.
Have l titillated nor seduced you with false hopes? No.These facts are too grimy; res ipso loquitor they are called. Therefore what consequences await us when our barrels get filled with American dollars? A stronger currency? Yes of course. A more prosperous economy? Not necessarily. A stronger currency and consequences arising from same is an ailment we haven’t treated before; a persistently deplorable Naira is all this generation knows. But Japan, China, Taiwan, South Korea know, that, a fertilized currency is a curse. The Naira could become so overfed, grow so big and proud to destroy the businesses and savings and property and investment of those who are not prepared for it. Beware!
Who would be the casualties of a stronger Naira?
The first is Labour and public servants.The higher the value of Naira against the Dollar, the lesser the volume of local money available to be shared between the 3 tiers of government. Let me explain with a capsule. In May 2023, ₦978b was the amount shared by FAAC, but sequel to the Float policy that crashed the Naira in September, revenues suddenly ballooned to ₦1,480b. President Tinubu got so scared of the numbers, he literally begged the states governors not to allow the whole loot shared because of inflation! But once $1 reverts to ₦600 band or lower, our governors would vomit all the free yams they have been eating since August 2023.
It’s worse the minimum wage agitation and negotiation peaked at the time when the Naira was most vulnerable. Many governors would fall into what I dubbed the Olusegun Mimiko trap. They would sign up for a wage band they lack future capacity to cope with. Labour is even asking for ₦615,000 per month! The wage crises that would engulf this country in the next 10 months would be worst than subsidy and Naira issues.
Another casualty is diaspora remmitance. At the peak of the Naira loss, l pleaded with my clients to convert their dollar assets and invest in Nigerian money instruments that are easily convertible to Naira. Our friends, family and associates who work remotely and earn salaries and commisions in dollars are also victims. Naira gain the past 60 days mean they have lost 50% of value of their income. Advisorily, Nigerians in diaspora have a few days window to do what is suggested above. It’s simple. Store your assets in Naira. You can re-convert later. For a huge profit.
Farmers, cash crops agro commodity exporters would be hit too. A stronger local currency means exporters and farmers would receive lesser Naira value for their products. Cocoa was sold for about ₦1m per standardized bag a few weeks ago. It would crash to half the value by end of year. Or even lesser. Ditto other agric products.
Real estate owners, car dealerships and importers who bought or dollarised their transactions should offload their stock, discount their prices and count their little losses. Now. So they could re-enter the market and stock for newer pricing. If they don’t, newer entrants with valuable cash would creep in and seize segments of the market from established operators.
Don’t be ridiculous. And don’t join the mob who say prices of products and goods have not fallen despite the forex movement. They would! Soon. And when they do, the result would be cataclysmic for those who are not prepared.
Peoplesmind
