Naira Depreciation: Speculators vs DD/SS

By Dr. Ahmed Adamu

The current Naira depreciation is as dangerous as Ebola crisis, but many undermine its potential repercussions. An elementary economics tells us that floating exchange rates are influenced by the invisible hands of Demand (DD) and Supply (SS), this effect may take certain period to manifest. However, other factors like speculation play vital role in stimulating swift depreciation of the Naira. I become suspicious of the recent Naira devaluation, and I want to believe the speculators are responsible for that.

DD and SS are the natural determinants of a currency’s exchange rate. In a lay man terms: When Nigerians went to international markets, they go with their products and their Naira and they meet Americans who also come with their product and Dollars, if at the end of the day, Nigerians bought more of Dollars (to acquire American products) than what Americans bought of Naira (to acquire Nigeria products), then Naira supply exceeds its demand. When the supply of Naira exceeds its demand, the value of Naira comes down.

The only commodity that has been protecting the Naira was the crude oil, and with low demand of the Nigerian crude oil, Naira demand has fallen down and its supply increases, which leads to down fall in Naira value.

It is obvious that Nigeria is catching up with “Dutch Disease”. A Dutch disease is a situation where a country rely solely on a natural resource sector as a source of its external earning, thereby making the manufacturing and agricultural sectors vulnerable and even more expensive than other countries’ manufacturing outputs (due to high cost of production as all raw materials are imported), and thereby low patronage. This will make the natural resource sector (oil and gas sector in Nigerian case) the only reliable economic sector. With the fall of demand for Nigerian crude oil (resulting from discoveries of alternative energy resources) and subsequent fall in crude oil price, the Naira and Nigerian economy is now in jeopardy, as there will no longer be demand for its crude oil and its currency. The manufacturing and agricultural sector are no where to absorb the shock. Therefore, Nigeria is now stranded, workers in oil and gas sectors loose their jobs, and production of crude oil decreases, more unemployment, low GDP, inflation and by extension, every single Nigerian becomes poorer by day. Students abroad pay more, people pay more to fly abroad, factors of production become more expensive.

Had it been the manufacturing and agricultural sectors contribute significantly to the Nigerian exports, outputs from these sectors would have been more competitive now at the international market, as it will be cheaper due to the low Naira value. If the demand for the manufacturing and agricultural outputs continue to increase, implying increase in Naira demand, then the Naira might redeem its lost value. But now the manufacturing and agricultural sector are not there, who will rescue Nigeria? Unfortunately, all I can foresee is continues down fall.

Nigeria could innocently be suffering as I believe speculators are responsible for the rapid and unprecedented fall in Naira value. Speculators in many circumstances, determine the relative valuations of currencies based on perceptions of key macroeconomic factors. Countries with excessive debt will often experience currency devaluation as speculators perceive greater risk. Speculators are punishing Nigeria as they foresee no future for the country’s economy given the above scenarios, hence their activities became responsible for the swift and continues Naira devaluation. People in ForEx business are responsible as they suspect depreciation of Naira in future due to the obvious reasons, and they continue to sell off Naira in their possessions to acquire other currencies, and this boost the pace of the Naira devaluation above what the natural DD and SS forces would have push it.

Now there is overflow of the Naira, and Nigerian government has to clear the market by supplying more foreign currencies from its foreign reserves, and pay more to service its debts. This leads to shrinkage of the countries foreign reserve, and by implication reducing the economic power of the country compare to many other countries.

Way forward:

1. Immediate revival of manufacturing and agricultural sector. If Nigerians can produce all they require within their country, they would never care about what value is ascribed to their currency at international market, as they will not need other currencies to satisfy their demands. This will also increase aggregate demand, GDP, and increase exports, and eventually restore the value of Naira.
2. Increase Interest rate and bank reserves: Cost of money shall be increased to reduce the Naira liquidity, and to control the resulting inflation from the Naira depreciation. Banks shall keep higher reserves to control money in circulation.
3. Reduction in expenditure: Government must cut unnecessary expenditures, and stop borrowing.
4. Reduce individual demand for foreign currency unless necessary, this can be enforced by introducing additional penalty for every foreign currency purchased within the country.
5. Pray-As they said, everything that happen to Nigeria, they will say “just keep praying” Maybe a miracle can happened. Lol We hope a miracle can happen soon.

Pls discuss….

On Education in Nigeria

By Dr. Ahmed Adamu

I recently met with a seasoned Mathematician and educationist who turned politician, he is now the Nigerian Minister of Education, he was a former Governor of one of the largest state in Nigeria (Kano), his name is Mallam Ibrahim Shekarua. I listened to the lecture he delivered to us during the NMF UK annual meeting here in London last Saturday, and I think I should share with you some of his submissions in the lecture and some follow up questions as follows:

1. Mallam Shekarau stated that Constructing Roads, Buildings and Some Fancy physical features may not always be an evidence of Good Governance. He said everybody can do such things, because it is about signing contract. However, morality and good conduct of people is the major and difficult achievement of every purposeful government. The context of his presentation was about Mass education as a vehicle (medium) for fighting poverty and promoting development. He claims that morality of society is more significant than physical development, and that is why he instituted the Hisbah when he was a governor in Kano state... What about you? what do you think about this?

2. The minister further stated that, there is no "Western Education". Education is Education, whatsoever. However, the manner and content of an education is what differs. "The only thing we have is western system of Education, and we can have Arabian System of Education, American system of Education, Hausa System of Education, Igbo System of Education, Yoruba System of Education... etc" The content of Education must be tailored to address circumstances, issues, and opportunities prevailing in society, and it has to be updated frequently. Pls Discuss!

3. "Child's ability to speak in English is not a sign of Quality Education, and parents who send their kids to private schools should not be deceived by their children's ability to speak in English. English is a language NOT Education" He also stated that.." Primary and Secondary Schools Education should be taught in native languages, so that a child can deeply understand the concept of the education. English language should be learned as a language, but not as a tool for acquiring Education." He claimed that Child morality, ethics and understanding of societal norms should be a priority. A professor who spoke in prelude to the minister's lecture mentioned that, what happened in Educational institutions is a reflection of the society, so, society dictates what and how education should be. Mr Shekarau barely started his main presentation before he exhausted his allocated time, he wished he would have been a discussant.

The above three points provoked incessant thinking on my mind, and I decided to share with you this, to hear you opinion about the above, and in general how we can make our educational system better. I as an Educationist, Economist, and advocate for quality education, always want to discuss on the topic: Education.

I was not given the chance to ask Mr Shekarau the following questions:

1. As a minister of Education, did you realise how Nigeria keep transporting Student to Education(abroad), instead of transporting Education to Student(at home). Noting the huge expenses associated with the option of transporting student to Education abroad, which includes payment of tuition fees, flight tickets, visa fees, living expenses abroad, etc Relying on foreign education as the only option for accessing quality education has led to the low esteem and competitiveness of the local universities, and this contributed to the continues devaluation of the Nigerian currency, due to the high demand of the international currencies and hence over supply of the Nigerian currency. Why can't we build Harvard University, Cambridge University or Oxford University in Nigeria? so that people from Africa, Asia, and Arab will have to come to Nigeria to acquire quality education, so that more Nigerians will have access to quality education. We can pay the current staffs and afford a running cost of a Cambridge standard university in Nigeria, why cant we do it? Recalling the huge costs incurred by both federal government, PTDF, TETFUNDS, State governments, private individuals, companies and parastatals in sponsoring student abroad. Putting these figures for just one year, it is enough to upgrade one university in Nigeria to that standard, and if we can do that continuously for six years, we can have six Cambridge universities in Nigeria.. What do you think?

2. My second question is: I attended public schools both at primary and secondary levels, and I can remember how very little or rather nothing I knew. I was accidently inspired to become serious only at the tail end of my secondary school, and I was lucky I accidentally pass my JAMB to go to University directly. I knew how lucky I am to wore green and white uniforms and still reach this stage, and I know we could not have many lucky people like me. The quality of education at foundation level is very poor and how do you expect students to cope with the more advanced University curriculum if the foundation is weak? People need not to be lucky to acquire education, it is a right. Would you consider upgrading the quality and standard of primary and secondary schools education by increasing the salaries of teachers at those levels so as to attract best brains at the foundation levels? It makes more sense to spend more at a foundation than at the upper part of a building. Discuss pls

If I am to become governor of Katsina State in 2015

By Dr. Ahmed Adamu

I have followed the political terrain in Nigeria, and wondered what sort of politics we practice. Politics shall be based on policies and ideology, and I have failed to identify candidates campaigning base on articulated programmes and policies especially at states and local levels. Alas, the bargain is between Votes for Money. It should have been Votes for Policies/Programmes.

I kept wondering what would have been the policies/programmes that these politicians should have been trading in their campaigns? What would have been their campaign promises that voters can hold them accountable? I decided to put myself in their shoes, and said, “What if I am one of the contestants for a state governor, what would have been my policies and programmes if elected?”, and I have chosen my state, Katsina State, and came up with the followings as my programmes and policies to implement If I am to be the governor of Katsina State in 2015 (they are presented in no particular order):

1. Reduce Embezzlement: I will reduce my salary and allowances to my current entitlement as a university lecturer. I will abolish the office of the first lady. I will reduce the number cars in my convoy. I will reduce the number of political appointees. All political appointees will be paid according their entitlements in their last jobs.

2. Education: Review of the school’s curriculums, elimination of less relevant modules, and introduction of new curriculums to address current challenges and opportunities. Increase the salaries of primary and secondary school teachers to the level of Polytechnic lecturers, this is to attract best brains at the foundation levels. Provision of education loan to students that cannot afford to pay tuition fees/school fees (at all levels), with agreement to pay 10% of their monthly salaries when they get job until they pay off the loan (if anyone dies before he/she could pay off the loan is forgiven). Strict supervisions and assessments of teacher’s qualities and qualifications. Reshufflement of primary and secondary school teachers. Annual mandatory training of school teachers. Provision of modern teaching aids and facilities at all levels. Constant power supply in educational institutions through independent power sources. Invest more on the state university to make it Pan African University. All families of public servants and political appointees to compulsorily attend public schools.

3. Town Modernization and Sanitation: ancient and remote localities will be refurbished, wide roads to be constructed, all water ways (sewage) to be sealed, pavements on all pedestrian paths will be provided. Provision of waste bins at every 250 meters (depending on the concentration of people in an area), introduction of plastic bag charges (extra levy on importers of plastic bags) and fine for improper waste disposal. Construction of modern smart tollgates for revenue generation and security purpose. Street naming, house numbering, and postcodes will be introduced. Town decorations, removal of animals off streets, and total ban of child streets begging (Almajiri camp to be established, all their teachers to reside in the camp, the children will study and sleep in the camp, clothing/uniforms to be provided, religious and modern education also provided).

4. Agriculture: Provision of Mechanised farming facilities for all. Large-scale government farms where variety of crops are harvested, processed and packaged for commercial purposes. Government to rear animals, process and package the meat for commercial purposes. Revival the leather industry (hides and skins) for exports. The Agricultural sector shall be able to employ 60% of the unemployed youths in the state and farming will be all year round.

5. Energy: construction of wind turbines and solar panels for residential and commercial sectors, ban of 100 and 60 watts electric bulbs, free distribution and installation of prepaid electric meters, provision of more transformers, development of local dams to generate electricity, electric wires in new extensions to be sealed in the ground.

6. Social Welfare package: Social welfare package to orphans, widows, unemployed youths and elderly people will be introduced. Social work to be assigned to the unemployed youths whose social package will be for maximum of one year.

7. Transportations and Safety: Introduction of double decker public buses (affordable), youths to be trained and employed to drive these buses on shift bases, the buses will follow many different lines that cover every possible destination. Private investors will be subsidised to provide and run these types of buses. Introduction of maximum allowable local speed limits of 60klm/hr for single carriageway and 70klm/hr on dual carriageways. Introduction of traffic sign posts and speed detector bumps. The Road safety agency to be equipped with high speed vehicles and gadgets to monitor and ensure compliance of the policy. Introduction and strict enforcement of MoT which is a test of vehicle safety, roadworthiness aspects and exhaust emissions (including cars, motorcycles and tricycles). All local mechanics to be assessed, licensed and supported to establish modern mechanic workshops. Consider the possibility of constructing railways and provide within and inter-state train transportation, this will be in partnership with neighbouring states.

8. Security: Introduction of CCTV cameras, special anti-bribery allowances to police, police patrols in every two hours in every locality. Provision of Police patrol vehicles. Capital punishments for criminal and corrupt offences. Prompt trials and rulings in courts.

9. Housing: Friendly and affordable housing policy, construction of more houses annually, and hugely subsidised for low and middle income earners. Encourage private developers to build more houses, and government will subsidise them for low and middle income earners. New extensions (for private developers) to be well planned and designed, and strict adherence enforced.

10. Health: review of health insurance policy to accommodate non-public workers, introduction of a policy/insurance to provide health services free/affordable for all. Free medical services from pregnancy to delivery. Introduction of government Pharmacies, improve accessibility to General Practitioners (GP), provision of direct line for booking appointments with GP, booking times from 8-10am. Emergency services provided 24/7. Provision of modern and well-equipped medical ambulances, direct lines for ambulances to be provided for all. Hospitals refurbishment, and provision of befitting and conducive facilities. Provision of constant power supply in hospitals at all time. Elimination of queues in hospitals, more doctors and health workers recruited. Provision of scholarship to medical students with a bond to work for Katsina state for ten years.

11. Youth Development and Sports: creation of youth development funds to develop their capacities and entrepreneurial skills. Grants to young entrepreneurs. Development and implementation of state youth policy, and annual youth summit. Youth recreational centres (conducive for leisure, entertainment, hospitality, Wi-Fi availability, sport viewing rooms, conference hall, meeting rooms etc). Annual sport competitions at different levels/stages (soccer, badminton, basket ball, handball, tennis etc). Upgrade of Katsina sports club to a standard world class sports centre, with indoor facilities. Partnership with foreign teams to sign local sports talents. Strong support to youth-led initiatives and youth councils. Establishment of youth parliament to train youths on leadership skills and governance. Annual youth award to appreciate hard working and exceptional youths as encouragements and inspiration to others. Young professional programmes to be established in all government and private organizations to train youth on different skills. Annual Youth Townhall meetings.

12. Potable water: provision of semi urban water supply scheme in every locality with distributing water pipes connecting every household.

13. Corporate governance and professionalism: All civil servants must be punctual, neat, dress corporately, be efficient, and to serve without fear or favour. Introduction of reward and punishment for avoidance and perpetuation of corruption respectively.

14. Hospitality: construction of world class 5 star hotel (and/or upgrade of Katsina Motel) to accommodate international investors, tourists and guests.

15. Online governance: active and interactive government website where people can visit to know about the activities of every government department and ministry. People will be able to contact public authorities to share ideas, make comments, and lodge complains. The website will be a data hub, where Research findings and data will be published and accessed.

16. Ultra-modern conference centre: world class conference centre will be constructed, this will enable hosting of many international and national events. It will serve as a source of revenue to the government.

17. Accessibility: I will make my mobile number known to everyone, and allocate times for direct calls and messages. Direct email address will also be provided where people can send letters and make contributions or comments. Quarterly visits to localities to meet people one on one to hear from them directly.

My Philosophy

The philosophies of my administration as a governor of Katsina State are as follows:
1. Honesty, transparency, and accountability
2. Empowering every citizen to realise his/her potential
3. Making Katsina state a global and national dream destination
4. Making Katsina State a model for modern cities in Africa
5. Constitutional democracy and social inclusion
6. Reduction of poverty
7. Socio-economic independence of Katsina State.

Every government activity or project must be in line with achieving one or more of the above philosophies.

I would like to ask my audience to compare my campaign policies and programmes with other contestants in all states and in all parties (where applicable). I unveiled my policies so that candidates will use it as a clue to develop more on their existing programmes.

I am your dreamed Governor in 2015.

Dr. Ahmed Adamu