Nigeria is still in its “supposed” anti-corruption mode from a governance perspective, but the current state of the economy is not going to permit its success no matter how hard the country tries or well-meaning the leaders might be. There is a highly overlooked aspect of corruption that directly results from macro-economic requirements, whether it is self-determined or imposed by multilateral agencies. The devaluation of currencies particularly in developing countries exacerbates the incidence of corruption.
As part of globalisation, economic self-determination for Nigeria is non-existent. Economic determination is firm and has to be dictated by multilateral agencies like the IMF or World Bank or EU etc. Amazingly, even middle-ranking civil servants in these multilateral agencies can veto or impose economic policies on democratically elected presidents, senators, representatives, governors; their cabinets and committees. Currency speculators and clubs are the real leaders of many developing nations. That is what is happening in Nigeria.
Whatever happened to democracy and the sovereignty of a republic?
Each time the Naira is devalued within the economy, the currency becomes less valuable making it less attractive to hold. When announcements of devaluation reach the media, thieving politicians often embark on foreign currency buying frenzies simply because they want to retain the value of the money they have stolen. Individuals taking their money overseas or buying foreign currency to cushion or offset the losses due to devaluation is a customarily embodied practice in Nigeria; if you have the money that is what you do.
What, therefore, happens is that those engaged in grand and [top-end] bureaucratic corruption would see a £1 million stashed in the United Kingdom as £1 million no matter what. However, when devaluation strikes, those same people will see £1 million kept in Nigeria as £920,000 or less. The resultant inflation arising from the devaluation could reduce the buying power of the £920,000 kept in Nigeria to £730,000. If this non-technical example is true, where would you expect those with the money to keep it?
How does the devaluation of Naira exacerbate corruption? It is the case that “capital flight” (i.e. the banking or investment of valuable public or private sector funds in the safe overseas countries) occurs because it is much safer for those with title to the funds. Capital flight also protects stolen funds from confiscation if prosecutions do occur in Nigeria. The incentive to take large sums of money overseas is irresistible. It becomes even safer to do since foreign banks are entitled to bail-out largesse from their governments when they fail while Nigerian banks are not, as dictated by multilateral agencies.
Capital flight and a high-spending consumer approach to the management of the economy ensures that Nigeria is not a nation committed to “national savings”. For sustained real economic growth, not “paper manipulated” growth, a nation has to save at least 25% of GDP annually. Nigeria is a nation expected to achieve global economic dominance without savings; that would be a true economic “miracle”. Surprisingly, hyper-rational neoliberals and their clients believe in this same “miracle” with great faith.
Furthermore, the devaluation of the Naira means it becomes cheaper to buy Nigerian products and assets. Such “opportunities” then encourage Nigerian public servants especially those in a new government to start stealing public funds energetically to enable them to use the money, with the tactic of using a foreign-faced front, to buy privatised state assets on the cheap.
Textbooks tell us devaluing the Naira will increase exports. Nigeria is a consumer-oriented nation that depends on oil income. If Nigeria had been a “moderate” to “high” production/manufacturing nation such thinking would be appropriate. Nigeria is not even a “low” production/manufacturing nation with a rapidly growing informal sector. Yet, Nigeria is gearing up for “world” economic power via total obedience. (see http://wp.me/p1bOKH-7Z)
It must be noted that selling at cheaper rates does not necessarily translate into greater income for Nigeria and thus economic improvements. Let us check the economic history. Unfortunately, it is Nigeria and Nigerians that get seriously devalued because socio-economically, “their way of life” is neither important nor a priority within the framework of globalisation. A country and citizens without good socioeconomic standards remain insignificant.
We are keenly waiting for President Muhammadu Buhari’s promise to make the value of the Naira to be made equivalent to the value of the US Dollar.
2 thoughts on “Devalued Naira or Devalued Republic?”
I wonder if the recent TSA policy if not well managed, will not complicate issue. With the present state of financial stagnation affecting Federal establishments.
By how much can the Naira be sustainably devalued as things stand? As you have pointed out, the dividends of divilauation are not likely to be of any economic benefits to any economy that is structurally very weak. Think of it. Which sector will any investor be confident enough to invest – to attract inward investment is the main aim of devaluation. Nigeria might be close death in the economic cold water.