The Nigeria economic situation and a story from Lebanon

By Tosin Adeoti (ED)

Are Nigerians who have elections approaching in 2023 paying attention?

I was surfing the BBC website last week when I chanced upon a story of a 42-year-old food delivery man who took a Beirut bank by storm. Hussein entered the Federal Bank with a shotgun and canister of petrol. As soon as he got in, he fired three warning shots, locked himself in with several bank employees and customers and threatened to set himself on fire.

As soon as I saw the headline, knowing what is happening in Lebanon, I instantly got an idea why he was doing what he was doing and made a mental note to come back to the new story. When I got back to the story, I found out that for 7 hours, Hussein held the bank hostage. Puzzling for the uninitiated was that throughout the episode, dozens of people gathered outside the bank showing support to him. There are reports that the hostages were calm and urged him on.

Why did he do that, you ask? Hussein wanted his money.

Hussein has $210,000 in his bank account, but the bank would not allow him to withdraw it. He said he had tried to ask the bank nicely, but he had been rebuffed. Needing about $5,500 to pay for his father’s hospital bills, he changed tactics.

Lebanon is in a mess. It has borrowed so much – 150% of its national input. But that is not the challenge. The challenge is that the country is unable to generate enough revenue to pay its debts. Not earning enough, the government defaulted on its foreign debt. It is also not attracting a lot of foreign currency, which is another way of saying that not many people want to invest in the country. Foreign currency inflow is important for the health of a country’s economy. The foreign currency brought into a country can be used, among other things, for import and export purposes. A stable foreign currency inflow help stabilize the exchange rate. A stable exchange rate encourages investments and businesses. Knowing that they will receive and at what cost they will receive foreign exchange helps them to plan.

Those in charge of managing the Lebanese economy in the last 8 years have not done a great job. In 1997, the Lebanese pound was pegged to the U.S. dollar at a rate of £L1,507.5 per US$1. In November 2019, the black market exchange rate reached £L1,600 per US$1. It became £L3,000 per dollar in April 2020. I am not sure how much it is as at today, but when I checked in May, Al Jazeera reported that the black market value of the Lebanese pound had fallen to an all-time low of 35,600 against the US dollar.

For my Nigerian audience, that’s the equivalence of the Naira, which was N450 to a dollar on the black market in April 2020 becoming N5340 in May 2022.

Now, you understand.

The crash of the Lebanese currency was exacerbated due to the Central Bank’s policies toward depositors. Those with dollars in their accounts are unable to withdraw them. While officially, you are allowed to withdraw a tiny amount per month, in reality, banks hoard it. There are also restrictions on transfers of money abroad. Many manufacturers are unable to import good. Parents are unable to pay for the school fees of their wards abroad. This has in turn dried up the foreign exchange inflow into the country; no investor wants to invest in a place where they are unable to retrieve their capital. The shortage of US dollars, which are used in everyday transactions in Lebanon, and the crash in the value of the pound have undercut the country’s ability to pay for imports, including essentials such as wheat and oil. Banks have stopped giving short-term loans to businesses and no longer provide them with U.S. dollars for imports, forcing people to turn to the black markets.

The World Bank said last year that if Lebanon’s “bankrupt economic system, which favoured a few for so long” is not changed, it might become one of the three worst economic crises since the middle of the 19th century. The UN says four out of every five people in Lebanon are living in poverty. As many people as can find the means are fleeing the country. Some of them have chosen risky journeys over the sea to European nations. Instead of staying in Lebanon, several Lebanese live in refugee camps in Cyprus. The inability to manage the currency has spilled over to inflation, water, electricity and fuel crisis. Inflation, for instance, is 890%. Al Jazeera released a report on Lebanon in September 2021 titled “Lebanon: What life is like in a ‘failed state’”. Just a few years ago, Lebanon was a leading provider of medical care in the Arab world. Right now, lights are turned off in corridors and administrative areas to save on fuel for generators for operating rooms. This country, which was called the Switzerland of the Middle East, is now avoided by investors and foreign businesses like a leper. It makes for a sad read.

That was the context for the hostage situation last week.

Hussein was merely demanding the Beirut bank let him withdraw his trapped savings to pay his father’s medical bills. Hussein’s wife, who was standing outside, told reporters that her husband “did what he had to do.” Dozens of protesters gathered outside during the stand-off, which lasted up to seven hours, chanting slogans against the Lebanese government and banks.

After hours of negotiations, Hussein accepted an offer for part of his savings, and the bank handed over $35,000 to his brother. Thereafter, Hussein was taken into custody. But on Tuesday, Hussein was released by a judge without any charges brought against him. According to his lawyer, the bank simply dropped the charges.

“He’s not even a real robber,” said a bystander, in the street next to the bank, to The Guardian. “He’s only asking for what is his. Our dear leaders sent all their billions to Swiss banks with the help of the central bank, and we’re all left to suffer. All of Lebanon wants to do this.”

“No one will say he did the wrong thing,” another bystander said. “Desperate people do desperate things. We are all like him. Even the soldiers and the riot police liked him.”

Is Nigeria’s Godwin Emefiele paying attention? Are Nigerians who have elections approaching in 2023 paying attention?

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