The naira has been on a steady decline for the past few months. The disparity between rates at the Central Bank of Nigeria (CBN) and that of the parallel market is as clear as the difference between day and night.
Many economic analysts and keen followers of the economy have blamed the situation on factors varying from the fall in oil prices to the depletion of the Excess Crude Account and the role of the Bureaus De Change (BDCs).
It would be recalled that former Minister of Finance and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala had a run-in with the 36 governors under the auspices of the Nigeria Governors’ Forum. Against her advice, significant portions of the Excess Crude Account (ECA) were used to augment monthly allocations to local and state authorities. The states had maintained that rainy days were already at hand and in fact (the rain) was already pouring, so the money needed to be used right away.
This rash nature of the governors, who always want to spend, spend, and spend, is why we are presently facing this freefall in the value of the Naira. If they had heeded the counsel of the former finance boss to save for the rainy day, we would not be in the mess we are in now.
But, no! They decided to feed fat on the nation’s oil boom and ended up plunging the entire country into economic crisis. Between 2011 and 2014, the 36 states of the federation received a total of N2.92 trillion from the Excess Crude Account. This amount alone is close to 50% of the country’s 2016 budget. What would be the strength of the Naira if these monies were saved and not expended by the governors?
Dr Okonjo-Iweala also said that a significant portion of the billions of dollars drained from the oil savings account over the past two years was distributed to “powerful governors” instead of being saved.
The decline in oil price reduced the earnings of the country. This situation in turn made the CBN to devalue the naira last year by 8 percent stating that it was running out of forex reserves with which to defend the currency.
If the governors had not arm-twisted Dr Okonjo-Iweala by depleting the ECA, the CBN would have had enough forex to defend the Naira instead of having to devalue it. And since then, the naira has declined steadily before its recent rise against the dollar.
You would remember that these same state governors requested $2 billion from the ECA to complete projects and provide security ahead of last year’s elections. The powers the governors wield have to be put on a leash lest they run this nation aground with their insatiable appetite. Nigerians must rise up and speak with one voice to confront waste in government so that our economy can be brought back to life.
Daniel Osofisan writes from University of Jos – danosofisan@gmail.com
