Peter Alexander Egom
22 August 2007
opinion
The Nigerian Debt Management Office, DMO, held an intern-ational conference on debt sustainability in June 2001. It was in Abuja. And I was there as an observer. That event was the last official outing of Izoma Phillip C. Asiodu as Economic Adviser to Presi-dent O. Obasanjo. It was also the first official outing for Dr. Magnus Kpakol, the neither here nor there economist, as Economic Adviser to Presi-dent O. Obasanjo. But, the main stars of that conference were the quartet of Mrs. Oby Ezekwesili, Dr. Ngozi Okonjo-Iweala, Professor Charles C. Soludo and Dr. Mansor Muktar. The World Bank had used that occasion to anno-unce them as its anointed quartet, come July 2003, with the scorched-earth mandate to finally drag the Nigerian economy, the heartbeat of the black race, back to colonial monetary manacle and bondage.
And, in this assignment the quartet has been very successful as the Naira under their watch has become ever so outward-looking and foreign-friendly, ever so work-shy and rural-shy in Nigeria, and ever so ready for the colonial monetary manacle of the fixed-rate currency board relationship with the imperial but terminally sick US Dollar. This is Mr. Soludo's latest plan for the Naira come Aug-ust 1, 2008. Indeed, the main assignment of the quartet has been to midwife, latest by July 2009, a new West African Currency Board with the US Dollar as its guarantor and currency of reference.
However, what intrigued me much at the Abuja conf-erence of June 2001 was not the Nigerian gang of four that the World Bank had chosen to corral Nigeria and the black race as whole back to colonial monetary manacle and bondage. Rather what caught and fixed my attention was this very stooping and very old man of an American by the name of Dr. Reginald Green. Ha! Ha!, was this not the same Dr. Green who had held the Tanzanian Treasury and President Nyerere's Ujamaa economic policy hostage with mumbling misadvice in 1974-75 when I was at the Bank of Tanzania at work with my flow of funds study of the Tanzanian economy? It surely was. And there and then I knew that the economy of Nigeria under President O. Obasanjo would not bring any economic good cheer to Nigeria and to most Nigerians. And so it has truly turned out to be inspite of Nigeria's unp-recedented run of economic good fortune in foreign exch-ange earnings from oil and gas export in the period 1999-2007.
But, we Nigerians owe Mr. Soludo a deep debt of gratit-ude. For flush, as he always is, with immodest and loqu-acious self-praise, he has gone on to give us the first ever clear statement about the Big Bang, or shall we say the Big Whimper, of the monetary theory and practice which lies behind the World Bank's colonial economic roadmap for Nigeria. For every econo-mic policy package anywhere must be held together and driven by a concise theory and practice of money. The job of any public statement on the relevant theory and practice of money behind any economic policy package is to, among other things, educate and inform the public on whether the money being used to manage the economic life of a nation is debt-based or commodity-based, is urban-friendly or rural frie-ndly, is public-sector finan-cing or private sector finan-cing, has outward-looking convertibility or inward-looking convertibility. For once these key attributes of the money in use in a nation have been decided upon, then the economist is put in the vantage position to anti-cipate where the nation's economy is headed with respect to providing its nationals with job, food and social security. Thus, quite contrary to popular belief, economics is a cut and dried subject which says that debt money is always an impov-erishing bad master where commodity money is always an enriching good servant. Thus, until Mr. Soludo happ-ened a week ago with his imp-overishing bad master of the debt Naira and the colonial dollarisation plan for the Naira, the hitherto World Bank approved economic managers of Nigeria had been all too vague about the theory and practice of money that drives their American wonder works or shall we say their American Good Works in Nigeria! But this is no more the case.
For Mr. Soludo has now made it crystal clear that the World Bank's economic policy for Nigeria has the impoverishing bad master of the outward-working and non-convertible Naira at its base and centre but that the Naira is be to given, come August 1, 2008, a deceitful patina of outward-looking convertibility by being manacled, in restricted colo-nial convertibility, to the terminally-ill US Dollar at the fixed rate of N1.25 to one US Dollar. In other words, come August 1, 2008, Nigeria will be returned to the colonial thraldom of the pre-October 1, 1960 fixed rate currency board debt standard where the fixed-rate colonial conv-ertibility of the Naira will be guaranteed by the US Federal Reserve System. Simply brilliant! But, treasonous and, treacherous all the same.
It was then realized that the ECO common currency had to have an anchor and a locomotive currency from among the members of the WAMZ and the choice for this fell on the Naira of Nigeria, in the same manner as the DMark was the anchor and locomotive currency of the Euro. So, all of the recent avalanche of talk by Mr. Soludo about the Naira being the currency of reference in West Africa, and Nigeria becoming the financial hub of West Africa, if not for the whole of Africa, is all tied up with the planed emergence of the colonial ECO common currency in July 2009. And after July 2009, it is the plan that a new colonial ECOWAS common currency will be forged out of the colonial CFA and the colonial ECO.
And, it was, indeed, my realization of the full colonial implications of the post -2003 economic policies of the World Bank's gang of four in Nigeria that prompted me to write as follows on page 95 of my 2006 book "Compass for Economic Reform:
Already, "by July 2004, it was clear to any keen obse-rver of the Nigerian economic scene that the ECO common currency project of the WAMZ would not fly by July 2005 as scheduled. What was missing and is still missing in this three-decade old colonial common currency project is a Nigerian anchor currency which has the colonial conv-ertibility of the CFA Franc or of the Hong Kong dollar. Accordingly the ECO com-mon currency project has been rescheduled to fly by July 2009 so that, in the interim, Nigeria would have to hurry and put in place such internal and external paym-ents arrangements that would inexorably lead the Naira, before July 2009, to the gallows of colonial convert-ibility. This is the sum-total of the colonial sense in the on-going economic reform programme of Nigeria".
So, Soludo's newly announced Naira revaluation and convertibility plan gives credence to what I saw of the colonial drift of Nigeria's economic policy as far back as July 2004 when Mr. Soludo became the Governor of the CBN. Indeed, the new Lagos-based US dollar trading African Finance Corporation, AFC, with the wholly paid up share capital of one billion US Dollars, is the precursor of the West African Central Bank and, naturally, the unending beefing up of the capital bases of Nigeria's commercial banks to at least one billion US dollars per bank is all in aid of Nigeria becoming by July 2009 the sub-imperial hub of dealings in foreign exchange in West Africa, a money centre in the footsteps of Dubai. And likewise the FS2020 is aimed at turning all of Nigeria into a country-wide and colonial bureau de change!
Besides, the revaluation of the Ghanaian Cedi in July 2007 is part and parcel of the planed dollarization of the Naira come August 1, 2008 and of the ECO come July 2009. Both Nigeria and Ghana are the key nations of the WAMZ and so the architect of the gale of dollarisation programmes that is sweeping Anglophone West Africa is the West African Monetary Institute, WAMI, in Accra Ghana. WAMI is set, under Mr. Soludo's say so, to ride rough-shod over the Pan-African monetary dreams and programmes for the indep-endence of Africa that Kwame Nkrumah and Ahmed Sekou Toure gave their lives to. How sad!
Anyway, WAMI's Naira revaluation and convertibility plan which Mr. Soludo has reeled out is as theoretically unsound as it is practically unworkable. For when we take a close look at the transformation of the post-2nd World War European non-convertible currencies to financial convertibility during the period 1950-1958, one would see how these econ-omies moved their currencies methodically from non-convertibility to financial convertibility through the mechanism of the European Payments Union, EPU, and with the Bank for international Settlements, BIS, of Basle acting as the EPU clearing house. But here in Nigeria we have an instant and mecha-nical Naira convertibility plan which does, overnight as it were, the American wonder of decreeing the Naira to cease to be non-convertible, to become convertible and to achieve fixed rate parity with, and convertibility into, the US Dollar. Where have market forces gone to Mr. Soludo?
It is unacceptable that those who have made a fetish of markets and market forces, should, when push comes to shove, decide to sell out com-pletely on the market mech-anism and to begin to behave in the much derided top-to-bottom manner of socialist economic czars! Where is Mr. Soludo's market route to Naira convertibility?
There is, indeed, a known market mechanism for the full and inward-looking convert-ibility of national currencies and it is, to put it mildly, a shame that Mr. Soludo, the best central banker of the globe in 2006, is not aware of this. But let me for the common good state what this market mechanism is by quoting from page 131 of my new 2007 book, "Economics of Justice & Peace", as follows"
...in-sourcing converti-bility arises when a state enacts and operates a law that ties the unit value of its currency in circulation to the proven physical quantum of extractable oil, gas and other mineral resources that the nation has under its feet. And the market mechanism which a nation uses to link its curr-ency to its earth-bound ass-ets of mineral endowments is a countrywide network of commodity exchanges. At these commodity exchanges, these commodity assets at various stages of use and finish are priced and paid for in, and with, the nation's currency. It is simply thus that the gold-Naira, or the petro-Naira or whatever commodity Naira will emerge in a Nigeria that wants to trade and pay equally at home and abroad"
In other words, and this is what Mr. Soludo must grasp, a bona-fide Naira convertibility plan must set-up a Naira-based commodity trading system in Nigeria where oil, gold, palm-oil, cocoa, groundnut oil, cass-ava, grains, etc, etc, can be traded in the Naira only. In this way, we create Euro-demand, US-Dollar demand, British Pound demand, Yen-demand,etc., for the Naira in Nigeria and we will then be on our way to becoming the centre of the global markets.
Such a Naira-based comm-odity trading system in Nige-ria requires, of course, that a new type of Naira is in use in Nigeria. This is the interest-free commodity Naira. This good servant variant of the Naira is what will transform the current colonial market regime of the import parity pricing theorem, IPPT, in Nigeria to the new and much-needed self-reliant market regime of the purchasing power parity theorem, PPPT, in Nigeria. It will also, tran-sform the current perch of Nigeria on the neo-colonial floating-rate currency board debt standard to its new and desired perch on the indep-endent fixed rate gold com-modity standard. So, the true convertibility plan for the Naira requires that we embark immediately on the planned two-year consolidation and liquidation of Nigeria's domestic overhang of public sector debt. For it is only in this way that the good servant and interest-free variant of the Naira will emerge to make the Naira a work-happy, a rural-friendly, a Nigerian-friendly and an international currency. In effect, a true convertibility plan for the Naira will use a Nigeria-wide network of the Naira-trading commodity exchanges to transform the current bad master variant of the Naira into the needed good servant variant of the Naira. Chikena!
The upshot of the above is that Mr. Soludo is very much at sea with regard to the type of the Naira revaluation and convertibility plan that will grow Nigeria progres-sively into social and material plenty. This is why he wants to make global players of Nigeria's commercial banks where and when he should be making great local players of Nigerian commercial banks. This is why he situates the locus of banking reform in Nigeria within the fiscalis-ation and externalisation of control over money creation and distribution in the Nige-rian currency market where and when a Nigeria-friendly and Nigeria-growing Naira revaluation and convertibility plan would situate the locus of banking reform in Nigeria within the privatisation and internalisation of control over the Naira creation and distribution process in the Nigerian currency market.
In short, Mr. Soludo, sad to say, is not abreast with the nuances of the relevant pay-ments standards-currency board standard, gold excha-nge standard, gold standard, and their corresponding market theorems-import par-ity pricing theorem, interest parity theorem and purch-asing power parity theorem, which a focussed and gungho Naira revaluation and convertibility plan must stra-ddle with ease. This is why his new Naira reform plan does,indeed, call his crede-ntials as an economist into serious question. Quite a shame for Nigeria and the black race as a whole.
Accordingly, Soludo's dense hatchet-job of a Naira revaluation and convertibility plan should simply be ignored for the sound and fury it really is. Besides, it is urgently necessary that transparency is brought into the apex mana-gement of Nigeria's currency, financial and industrial Naira flows by giving a federated and democratic zonal struc-ture to central banking in Nigeria. In this way, the work of the Naira will be brought closer to Nigerians in their rural catchment areas and central banking in Nigeria will now use the market mech-anism to halt and reverse the current horrendous scourge of the rural-urban drift of Nigeria's agricultural manp-ower. God bless,keep and grow Nigeria.
Peter Alexander Egom is a Consultant, Academic Editor at the NIIA Lagos.
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