By Iyiachukwu Achukwu
I don’t care where you studied your own Finance, if you run an economy the way it is run in Nigeria, the local currency has to respond in the way it is responding – valueless. If you like blame AbokiFX or InyamiriFX and whatever arbitrageur you could reckon.
Money is value exchanged. The paper stack of Naira you have, is a mere representation of Money and not the actual money, if you know basic economics. We called it a store of value. I will try to keep this casual because everyone is involved in this value question .
Currency money is whatever a Sovereign State calls currency. This is not elementary, so I will expand a little. If the Federal Government choses call Mango leaves it’s currency money, it simply gives it fiat and it exchanges for value. So, value is still the actual money, okay?
Even a rookie or one without any knowledge of Economics uses that language, “Naira is valueless or Naira has no value. ” The language is very right, though it is often used, in a limited understanding, to express just the purchasing power of the Naira.
Beyond such limited understanding of the valueless Naira is the econometrics question of what and what are represented by the Naira in your hand? I called this The value question.
I am trying my best not to sound academic here, because I have followed a lot of academic arguments online and I have equally done my gap analysis and realised that it’s nothing to do with sophisticated academics sophistry.
It more to do with two very scarce scarce resources in Nigeria of today – Common Sense and Sincerity. We may talk wonderful classical or keynesian philosophies and juggle with some Bretton woods econometric templates, but mmadu anaghi agholi onwe ya.
I am putting aside all those balance of payment, Fiscal and Monetary policy talks. I respect the hypothesis . They are not without significance, but within the context, the measure of significance is outside value of 0.05
By the way, I think I equally have about two or three postgraduate certificates in the field of Management, Economics and Finance – and my classmates are here on this wall. I used to be a serious person before I begin craze o. Lol
The West could use the IMF to play this book game on us, but we are supposed to be an independent country like China. We are supposed not to lie to ourselves, even when the West is lying to us.
There’s a way these things are done, but that’s not my discussion today. However, you could take this home from me, If the West have an IMF Tablet that Nigeria could swallow and she will become as great as the Great Britain, they will never let such a Tablet cross the Atlantic ; let alone getting to Nigeria.
Let me get back to the Value Question and begin to conclude. What value does the Naira in your hand represent? I live and work in the UK. If I have £5 in my hands, I know automatically what fraction of my hourly rate it is.
I gave up my one hour somewhere and exchanged it for the money in my hand. I will never get that one hour back again. I have lost it completely in this life. Maybe I could have used it to sleep, if I hadn’t gone to give it away at the work place. You don’t want to calculate the life, the brain and the energy I give up with that hour as well? That’s a discussion on implicit and explicit jargons.
The employer has done all these calculations and I have agreed with his calculations that this is a fair exchange for the above listed components of my 100 years in this world which I am giving up for the £s amount.
You are getting an understanding of the value of the money, aside the elementary knowledge of “Naira is useless” because it can no longer buy same cups of Garri that it used to buy? I look at the £5 in my hand and I know the value it represents.
Now back to Nigeria, you have currencies printed at exorbitant figures to represent values that do not exist! I hope I could still keep this very understandable without sounding academic?
Okay, let me go this way : When you pay a Senator of the Federal Republic, say, 10,000000 Naira, what value does that represent? Absolutely no value. Whatever a Senator goes to do in Abuja weekly for 10,000000 can still be done by a lawyer, for instance, at 50k.
When you remove 50k from 10m, you can see how much valueless Naira is in circulation. Okay, because Naira is what the sovereign state of Nigeria calls it’s currency, the CBN has a duty to still print those Valueless Naira, that is left, after you have subtracted 50k from 10m.
Do you know what? Only a quotient is being minted locally (as much as I know) and the bulk of the Naira minting is contracted to British firms here in UK and in Singapore. We pay their services in Dollars or crude tradeoff.
You see why I said the issues are those of two scarce resources? We lack the common sense and we are insincere to ourselves. There’s no way we could be living this lifestyle and expecting a different result. No way. It’s a common sense.
The reason Buhari goes to borrow every day is because we are too insincere to tell even ourselves the truth that we don’t want to cut our coats according to our sizes. We want to maintain the same lavished life’s our Senators and NASS and President and Governors are living. The only way to make sure we don’t tamper with their luxury is to keep asking for foreign loans. No common sense. No Sincerity to self.
The foregoing is the problem with your Naira. I have only used the Senators here for my example, but indeed, in almost all sector of the economy, people are pocketing figures which do not represent any value they have given up. Firms do not exist to hire labor and exchange value. People suddenly wake up in millions through pen or laptop criminality without a corresponding exchange of values, etc. Unearned incomes undermine monetary econometrics no matter how succinct the Fiscal policy presents .
Iyiachukwu, MA. MBA. Msc. England.