Other Reasons Why the Naira Is Worthless

March 13, 2017by Tope Fasua0

Until recently, the naira at N520 to $1 was one of the most worthless currencies in Africa. Now that is something. So much for being the largest economy in Africa. Size should count for something, shouldn’t it? Yet there are many ‘experts’ who still swear on their dead grandmas’ graves that the ‘naira is overvalued’ and needs to ‘find its true value’. These guys – many of them ‘intellectuals’, and many trained abroad – are clamouring for even more devaluation. Every financial news item I have read in the course of this month and the last carried comments from some ‘smart Alec’ or the other that they expected – and still expect – a devaluation of the naira. I concluded a while ago that perhaps everything we were taught in economics in university is either wrong, misleading or simply out of context. For instance, a test I conducted with university students recently, revealed that they are still being taught ‘Land’, ‘Labour’, ‘Capital’ and ‘Entrepreneurship’ as factors of production, up to the Masters level, in an era in which ‘Talent’, ‘Intelligence’, ‘Information’, ‘Data’, ‘Knowledge’, ‘Technology’ and others are now more important factors of production! The idea that Land, Labour and Capital are the only important factors of production belongs in a distant past; an era of crude, slow manufacturing and service delivery. So the world of economics has changed but we haven’t.

Some of our best ‘economists’ are convinced that the elixir to Nigeria’s economic heart failure is on the shelf in the nearest economic pharmacy. They do not bother to do a proper and critical diagnosis. For them there can be no peculiarity, and they look so aghast when anyone argues – given empirical evidence – against the terminologies and theories that they have learnt in school. You hear them say things like ‘it is demand and supply, simple’, ‘markets are perfect’. ‘It’s all about data, simple’. Simple? No, not simple. It is complicated.

A serious manager of the economy must be abreast of developments, and not be caught unawares. With your hands, you can improve your destiny. As a matter of fact, that is the only method for choosing a destiny. It is not about command and control. It is about showing up and being relevant; it’s about getting involved. The story is told of that person who went to a diviner to tell his destiny. He was told to drop a tortoise. If it went right, his future will be great. Left, and his future will be awful. He dropped the tortoise and it went right. He was elated. After a while, the tortoise abruptly changed course and decided to head left. The guy panicked, picked it up and dropped it towards the right. The diviner told him he had done the right thing; your destiny is in your hands. Even in matters of economics, don’t be deceived; our destiny is slam bang in our hands. So, note that markets are grossly imperfect, especially in an environment such as ours. We’ve been burnt so many times by the markets. Even globally, governments have had to put taxpayers’ funds in markets to keep them afloat. Banks, automobile companies, airlines and other companies that should die as a result of the verdict of the market have been kept afloat. It is therefore unmarketable to the discerning that the market should totally determine the fate of the poorest.

The quirks with demand and supply, I have explained earlier. We know what Nigerians demand dollars for, for example. In Nigeria, we have some peculiar demands that don’t feature in the textbooks e.g. billions of dollars are demanded yearly for bribes. Under CBN Governor Sanusi Lamido, there was a point it was revealed that Nigeria is the largest importer of dollars in the world. In other words, there is perhaps more dollar cash in Nigeria than there is in the USA. Other rogue states are like that. Even Russia is like that to an extent. Dollar is the new currency for corruption. They hardly spend $100 in the USA. We take that for granted here. It works for the USA; they get the seignoriage associated with printing their own currency, and leverage on petrodollar (the idea that since crude oil is invoiced in dollar, the higher the price, the higher the dollar dependency of other countries).

As for data, we have a problem with how they are generated and most of Nigeria’s data is ‘dirty’. Too many parameters are not captured in our data that should have been. Did anyone capture Andrew Yakubu’s $9.8 million before it was discovered? Did we plan with that data? What about the hidden of billions that we are yet to capture? What about fake imports and money laundering? Over and under-invoicing? Round-tripping? Abeg, forget that data business. Not in this country! We have tremendous work to do on our data before we can rely on them. People like to quote the great data master, Late Hans Rosling who said, ‘Data allows a political judgment to be based on facts, to the extent that number describes reality’, but they craftily omit the emphasis on the last part of the sentence. Does Nigeria’s data reflect reality? The guys at NBS are trying their best but they obviously lack funding to reach as many Nigerians for data as should be the case. Can anyone guess how much was spent in beer parlours in any of our ghettos last night? Even the nightclubs in highbrow areas falsify their records. Heck, banks have three different servers and three different accounts. Telcos will never let you know just how much they earn. Where then is the data. Data integrity only occurs in societies where there is high sociopsychological integrity. Not in a country like Nigeria. The kind of sick tales we hear boggles the mind.

I remember being taught what is called the LSE (London School of Economics) approach to financial/economic modeling at Masters level in the UK. It is basically about how you form your models, or how you can scientifically prove what factors influence or cause any economic phenomenon, say GDP, inflation, economic growth, and so on. One of the key planks of the LSE model is that you should populate a model with all the variables that you believe are responsible for the phenomenon you are estimating. Then you start to test if they are significant or not, using t and f tests. Where we fail in Nigeria is that we do not include as many variables as we should. For example, we speculate on the value of the naira, and talk about it being determined by demand and supply, but we ignore the FACT that a large chunk of demand is for illegal purposes (such as the $9.8 million Andrew Yakubu stashed in some ghetto in Kaduna). Given that there are thousands of wicked souls like Yakubu (I can’t stop talking about this ‘born-again’ guy), whose only claim to wealth and fame is that they worked for government and stole us blind, we could assume that more than $10 billion in cash exist in different parts of Nigeria, conveniently outside the system. Black money.

When those monies were being bought, they formed part of the ‘demand’ that we simplistically talk about as if every society is the same. No one makes such demand in the UK for example, even though I admit that all societies are corrupt to varying degrees. If we are able to supply those billions of dollars to the Nigerian economy, there is no gainsaying that the naira will firm up suddenly. No one should be surprised that the naira has gained so much in a few days. The economy just doesn’t exist in the coherent, sophisticated, and over-confident manner in which it has been described by our ‘market pundits’. This economy is legless; more of the cash exist outside the system and under the radar of our data gatherers.

Anyway, for the naira to really find its level (for those who are still interested):

  1. We have to get every dollar stashed in different parts of Nigeria by criminal public sector officials and their private sector cronies. Every single dime of those billions of dollars were procured with Nigeria’s resources – with our naira. This is how it works; for anyone to bribe Andrew Yakubu and his likes with billions of US dollars, they had to ‘short’ the naira. I mean they had to withdraw naira and go to the black market to buy dollars for delivery. Each time they did that (and that is all the time – for it’s still ongoing), the naira weakened. And until these amounts are reinfused into the system, we cannot get the ‘true value’ of the naira, for these corrupt practices form the major part of the demand for dollar in Nigeria. Since e-banking made its debut in Nigeria, and people found it difficult to withdraw large amounts in the naira without unnecessary charges and attention, the dollar has been the major conduit for illegal transactions. A good, enlightened analyst should also ask for these recoveries to be intensified. Failure to do that, people will ask on what basis anyone is calling for further devaluation if not to take a position and continue to clean out Nigeria as they’ve done for some time now.
  2. We have to check our priorities as a people. Recall the fact that we are historically dependent on other peoples for almost everything we need. That will be tough to change for now. But we aren’t even trying. The 2017 budget is made up of all sorts of hopeless spending by the Federal and State governments. Perhaps half of the budget will be used in procuring everything foreign viz;


  1. Generating sets,
    b. Luxury cars,
    c. Building materials from abroad,
    d. Drugs from abroad,
    e. Agricultural machinery from abroad,
    f. Fertiliser from abroad,
    g. Seedlings from abroad,
    h. Pesticides and supplements from abroad,
    i. Consultancy from abroad,
    j. Contractors from abroad,
    k. Uniforms for the armed forces and police from abroad.
    l. And so on…


If the Federal Government is not ready to even strain itself a little by constricting as much as possible of its spending towards Nigerian products (warts and all), how can it expect that the people will lead the charge? Why is government not buying Innoson and PAN? This is where the sheer absurdity of expecting change to start from the people comes to the fore. Equally at state level, most of their budgets will be used to buy foreign goods. And the salaries that we pay, will naturally be used by the citizens, to buy foreign goods; for the people don’t even have any choices. If you want the naira to have value, start to think of how you can reverse this trend. If you wait for demand and supply to continue to dictate the pace, you will find the naira as worthless as the Zimbabwean Dollar used to be – before it was altogether abolished.

  1. Change our economic ideology/ethos. For now, it’s all about borrowing and Foreign Investors. The naira is not strong because we are not getting non-debt inflows. We are heavily borrowed. And we are borrowing some more. In an economy where we claim to be recovering so much from thieves, and where we haven’t yet achieved any considerable level of fiscal responsibility, what we are doing is to borrow heavily and mortgage our own future. That will not work at all. Other countries, even in Africa, are getting non-debt inflows. They can point to tourism dollars. Nigeria cannot. This is how to profoundly help our supply side. The best we get here is portfolio investments (in our stock and bond markets) which we make so much hue about. These days, we are even reminded why we need to devalue the currency so as to attract portfolio investors! Yet we know that these guys are too smart for us with their hot money. Is this the best we can do? I watched one of the young British traders on TV the other day saying they will not come back into the Nigerian bond market except Nigeria devalues and increases interest rates at the same time! What a nerve!! Where else do you get that double whammy? If we devalue and increase interest rates for you to bring your hot dollars what do we get in return asides from a momentary and fleeting financial orgasm? But they got what they wanted in Nigeria. They always do. Our own people here will support them. There is a war afoot between these types and those who genuinely wish our country well. Some others are only interested in making money. More to come.

by Tope Fasua

Tope Kolade Fasua is a Nigerian ex-banker, entrepreneur, economist and writer with 28 years of work, business and policy analysis experience. He is the founder and CEO of Global Analytics Consulting Limited, an international consulting firm with its headquarters in Abuja, Nigeria, and footprints in the United Kingdom, USA and United Arab Emirates. Fasua has authored numerous columns on newspapers and six books. He currently keeps regular columns on policy analysis issues with Premium Times and Daily Trust newspapers.

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