Reflections Of JP Morgan Delisting On Nigeria's Economy

Date:

NairaTHE delisting of Nigeria, the other day, from the Government Bond Index Emerging Market (GBI-EM) by the United States financial institution, JP Morgan, and the quick reaction of the Nigerian government, are deserving of frank comments to dispel the myth of plunder-laden econometrics through which powerful nations engage in financial relations with emerging economies.

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This is especially true considering the fact that a section of the western media supportive of the free market economy has launched syndicated attacks to put pressure on Nigeria to succumb to JP Morgan’s demand, which is to further devalue the naira.

JP Morgan announced that it would delist Nigeria from its influential emerging markets bonds index, citing the Central Bank of Nigeria’s stringent control measures to prop up the naira as a reason for its action. This protectionist stance of the Federal Government, typified by the implementation of the Treasury Single Account and the strictures on dollarization of business transaction in the country, has been construed from the other end as bordering on foreign exchange liquidity and lack of transparency.

Shortly after the U.S. financial institution announced its delisting plan, the CBN governor, Godwin Emefiele, dismissed the alarm raised by the US financial institution and foreign investors as unfounded, on the ground that the demand for the dollar was being met, even as a cleansing exercise was ongoing in the system.

In the reckoning of JP Morgan and its investment cohorts, the rising demand for foreign exchange and the short supply in the economy are situations necessitating a devaluation of the naira. By their argument, devaluation is expected to enable Nigeria earn more foreign exchange. In support of this position, some analysts argued it makes macro-economic sense to devalue the naira since Nigeria is largely an oil-dependent economy. As one of such analysts told the Financial Times of London, “Nigeria needs to acknowledge that oil prices have fallen and that price, including the FX, must adjust accordingly, even if it hurts in the short term.”

From every indication, this is an orchestrated blackmail against Nigeria, which has devalued its currency twice this year. If foreign investors deem it wise to protect their funds, Nigeria, as a country has the right to protect its interests, image and people, should it find the current structure injurious to its economic well-being.

However, there are many injurious conditions that devaluation wreaks on an economy. Firstly, with further devaluation of the naira, business relations would be so lopsided that irrespective of quality of goods and services, transactions in naira would be to the advantage of foreigners: Nigerian goods would be far cheaper for foreign investors, while foreign goods would be very expensive for the Nigerian. In the parlance of the common man, to get foreign goods, Nigerians would have to pay more, while foreigners for a pittance would buy more Nigerian goods. This is by every means detrimental to the economy.

Secondly, in oil, Nigeria’s mono-economy, which happens to be its chief source of foreign exchange, pricing of the product is determined by factors of demand and supply in the international oil market, while the volume to be supplied into the market is dictated by the Organization of Petroleum Exporting Countries (OPEC). Given such control mechanism, it is hardly the case that devaluation would result in more foreign exchange for the country. Conversely, devaluation would increase the cost of production since the consumable for this highly technological industry are foreign products.

Thirdly, currency devaluation, in this circumstance, is a device contrived by the predatory portfolio investors favoured by JP Morgan and its ilk. They come and throw in some money at the slightest flash of opportunity and then pull out their funds when they sense signs of instability or any form of incongruence.

Based on the above, the decision of JP Morgan and its economic acolytes is not a true reflection of the state of the Nigerian economy as being bandied. The insistence on devaluation of the naira as a basis for economic development is a bogus tactics of pauperization and enslavement. This is also the economic strategy of the World Bank, International Monetary Fund and the Bretton Wood Institutions. The J. P. Morgan model of economic development, by whatever lofty nomenclatures they are referred, is a re-echo of the infamous Structural Adjustment Programme (SAP) and the horrors it wreaked on the Nigerian economy.

If the western portfolio investors are desirous of the well-being of Nigeria, they should participate in capital investments that transform lives, facilitate socio-economic stability and enhance the quality of life. Alas, this is not their intention; hence the production, costing, marketing, control and regulation of Nigeria’s natural products are controlled by the west. As if this is not enough, China, the emerging world economic power, is also turning Nigeria into the junk-yard of its products and services.

Nigerians should feel grateful to providence that this is happening at a time this administration has resolved to orientate itself towards change. The JP Morgan decision affords the Nigerian authorities the opportunity of a rethink: to consider the terms of the nation’s incongruous tie to an exploitative global world order or the lopsided economic and financial relationship with western financial institutions.

The Nigerian political thinker, Claude Ake of blessed memory warned decades ago: “Foreign agents do not see the people as agents of development or as the essential energy that must fuel it, as a source of ideas of how to proceed, or even as a constituency to which the agents are accountable.” If Nigeria’s economic theoreticians are merely megaphones of the doctrinaire economic theories of the west, this is the time to think outside the box of such perilous financial ties. As a people who must take their destinies in their hands, Nigerians should think out models that consider the financial health of the economy rather than grapple with deals that would please other economies.

To give bite and verve to the CBN governor’s protectionist stance, Nigerians must rally round this government in its move to save the naira, and thereby the nation’s economy. Alongside all Nigerians, this newspaper is insisting that President Buhari should stand up to roaming portfolio investors who want to plunder the country by creating rules they themselves do not obey.

 

The Guardian

Babatunde Akinsola
Babatunde Akinsolahttps://naija247news.com
Babatunde Akinsola is aNaija247news' Southwest editor. He's based in Lagos and writes on the Yoruba Nation political issues, news and investigative reports

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