Nigeria needs to be reset now or very little will make sense

by Gwon G Wolo

Nigerians are bewildered by what is happening to them right now. 

The foundation on which their lives depend has buckled. 

The fear is palpable and the prospects of being alive and free is diminishing by the hour. 

Civil society groups such as the Nigerian Bar and ICAN and NLC are afraid to even try to explain what is going on.

 Nigerian banking systems is on the brink of total failure.

 And governmental processes have collapsed.

 Neither the Judiciary nor NASS has the gumption to play their roles. 

The Executive Branch is overwhelmed and there is chaos in the Ministry of Finance. 

Let’s try to clear the fog for everyone in a question and answer format. 

Q. When will Naira start floating and stop falling? 

A. You have to ask the Nigerian banks and the CBN. 

They tied a big rock on the neck of the naira and threw it into a bottomless pit.

 If Naira stops at 3000 to one dollar by Dec 2024, you should consider that a miracle. 

The Naira is not floating.

 It is hurtling down a shaft of bottomless pit. 

Q. What do the Commercial Banks have to do with it?

A. Banks make money by lending. 

With the hyperinflation rate, no Bank dares lend money. 

First, they don’t know what rate to lend at and they are not sure that their borrowers won’t go under. 

To meet recurrent expenditures and make profit, the Banks are all Forex trading. 

To make money, they have to create artificial margins to harvest their profits, causing the exchange rates to increase and it has to increase higher than the inflation rate for them to make real profit. 

Q. Why is the CBN not doing anything about it? 

A. If the Banks cannot trade on the Naira and can’t make money by lending, they will all fold.

 The CBN is afraid of the total collapse of the Banking Sector. 

But the CBN has to have conversation with the Banks because nobody is making real profits in this economy.

 Hyperinflation is wiping out the value of illicit and legitimate profits. Nigerian bankers should stop and work with the CBN. 

Q. Didn’t the CBN anticipate this? 

A. It did but politics killed the Emefiele CBN. 

The CBN Governor was reduced to a houseboy of the Executive Branch and simply lost control of the economy under pressure from corrupt Nigerians. 

Q. When did things start unfolding? 

A. It started right around August 2014 towards the tail end of Jonathan’s regime.

 PDP was profligate and politicians were literally swimming in cash. When Jonathan lost in 2015, a lot of that cash went immediately underground waiting for Buhari’s regime to come and go. 

According to the CBN, roughly one third of the Naira, about one trillion naira, was presumed hidden during the Buhari regime. 

Q. So there was an immediate hypoliquidity shock on the system when Buhari took over.

A. Yes and the economy convulsed and began to contract immediately. Buhari had zero economic plans and took his time trying to appoint the right economic team precipitating a massive dollar flight out of Nigeria as investors foresaw the difficulties ahead. 

Then the price of oil fell as well.  

Q. So Naira hypoliqudity, forex flight out of Nigeria and fall in oil prices set things in backwards motion during Buhari’s regime? .

A. Yes.

 The revenue base shrank. Buhari came with “this is the North’s chance” mentality but there was no money to support his ambitious Northern agenda while subsidizing fuel importation, he went into unregulated borrowing and things fell apart.

Q. So it started with massive corruption during GEJs administration, followed by reckless borrowing, even more corruption under APC,  and weak economic policies during Buhari’s regime, overtopped with a CBN that abdicated its role and here we are.

 Where exactly are we?

A. We borrowed more money than we can pay. 

On top of that, we squandered the money we borrowed on capital projects and Nigeria has no money to fund recurrent expenditures nor fund her basic needs. 

In other words, Nigeria is totally bankrupt. 

Q. But we are still selling oil, aren’t we? 

A. Ask the Ministry of Finance and the NNPC. Nigeria’s finances is shrouded in mystery. NASS is missing in action. 

The truth is that all the money being made from crude oil is going into loan repayment and all that uncertainty is driving manufacturers out of Nigeria. 

Q. Why can’t Nigerians be told the real truth about the state of their economy.

A. If the world knows the true state of Nigeria’s economy, they will deal with Nigeria with utmost stringency.

So hiding one’s economic weaknesses is not a bad idea. 

But all the indices of bankruptcy are there and no one wants to deal with a bankrupt nation, let alone one that doesn’t have a plan. 

Q. But Dangote Refinery was a huge plan, wasn’t it?

 At least, it was so until it began to import crude and export fuel, leaving Nigerians quite aghast as to what is going on with the Refinery.

A. No one does well dealing with a bankrupt partner. 

The Refinery is a business and needs cash to operate, particularly dollars to fund executory contracts and other things. 

The Refinery cannot rely on promissory notes from NNPC. 

And it cannot rely on operations from the domestic market to raise forex with all the speculative trading going on. 

Q. Kai. How will this end? 

A. Nigerians have to take back their country and totally reset it back to 1966 regional federalism model. The Presidential system of government is too costly and unsustainable.

 The unitary federalism needs to give way to true federalism and to be frank with you, we need draconian measures to deal with corruption because it is the cancer that is killing Nigeria.

Q. One last question. So how did all the money politicians hid away during Buhari’s regime come into our recent quagmire.

A. The intention of the CBN was to print new notes and control the liquidity but that project was frustrated by politicians so much so that both the new notes and the old notes are now circulating. And quite probably, the CBN was printing Naira to meet its obligations. So we went from hypoliquidity during Buhari’s regime to hyperliquidity during Tinubu’s regime. 

The predictable outcome is a run on Forex. With that, inflation went out of control, the Banks stopped lending and joined the forex trade and things spiraled out of control. 

Nigeria needs to be reset or very little will make sense going forward. 

The prices are not based on real values. 

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