The naira is already devalued – Utomi

Prof Utomi

A former presidential candidate of the African Democratic Congress, Professor Pat Utomi, believes the ongoing conversation for or against the devaluation of the naira is laughable and wrongly premised. According to him, the Nigerian currency had already been devalued.

The professor of political economy and management expert said the government could not shy away from the rate of the currency at the parallel market and insist on selling naira at the interbank rate, thereby giving room for some Nigerians to continue to benefit from the situation.

“The whole exchange rate conversation is wrongly premised. Some want the currency devalued, others do not. The naira is devalued already. It is those who do not understand the issue that are creating the problem,” he said.

“The value of the naira is known to everyone. What matters in this conversation is not the nominal value of the currency, what matters is the stability of the currency such that people can anticipate, plan and engage accordingly.”

Utomi, founder of the Lagos Business School, believes that administrative control of the currency rate by the government is difficult because of high cost. According to him, Nigerians do not possess the high level of discipline for such control to be workable in the country.

“I have heard people say that it is importers that want the naira devalued, that it is those that patronize local products that do not want the naira devalued. Ah! I have never seen that kind of illiteracy in public conversations. It is the direct opposite. It is those who import things that will not want the naira devalued, so that what they import can be cheap. If the naira is devalued, what they import will become expensive,” he stated.

Utomi, 60, called for a diversification to tourism, as a short term measure, and a drastic cut in costs to ensure that existing resources are adequate to stabilize the nation’s economy. He described the current economic challenge as temporary. Nigeria, he recalls, had experienced a similar situation in the 1980s.

“This is a temporary blip. Nigeria will not permanently be in a situation where it cannot afford to pay for its imports. Nigeria has experienced a sudden drop in its foreign income. What Nigeria can do is to cut its cost dramatically. When Nigeria experienced similar economic challenge in 1976 during Olusegun Obasanjo’s regime as Head of State, Obasanjo quickly did what we called ‘low profile.’ The Head of State’s official car was a Peugeot 504, and nobody in the whole service drove a bigger car. So, we trimmed our sales.

“We are in a similar situation today but members of the Senate intend to purchase Sports Utility Vehicles. The motorcades of governors are getting longer. So, there is a delusion on the part of the political class about Nigeria’s reality. When a country experiences a temporary blip, what may be done is borrow money to get over these difficult times while you reposition your economy either by diversification or hoping for oil prices rebound.

“It was easier back then in 1982 because Nigeria had a blocked currency, that is, the value of the naira was administratively determined by the Central Bank of Nigeria. Today, the currency rate is expected to be determined by the market. The market states that the value of the currency to the dollar is N400.

“It does not matter what the President thinks; what Pat Utomi thinks. The value of the dollar is N400. The only thing is that the Nigerian government has decided that it will sell its own dollars at a certain amount, not N400, probably N198.

“So, how does the government determine who it will sell a dollar to at N198? You can carry out all the anti corruption campaigns of the world. Someone sees that he can buy the dollar at N198 and others buy at N400 will seek to make some money. Regardless of all the army of the world in place, we must understand that human beings are greed-driven.

“I am not saying that administrative decision-making is not possible but the costs are so high and the level of discipline required is not available in this environment that I think it would work out. We should cut cost dramatically so that the resources we have can stabilize the country. Government has become bloated. Now is the time to feel the pressure and begin to make changes, even constitutionally”.

According to him, diversification would ensure that all zones become productive and impactful on the value chain. This, he said, would ensure that all zones are endowed to become globally competitive.