INTERVIEW: ‘Nigeria Is Broke’ — Why Cardoso’s Magic Wand Couldn’t Save Naira

When Olayemi Cardoso commenced his tenure as the governor of the Central Bank of Nigeria (CBN) in October 2023, the naira-to-dollar exchange rate fluctuated betweenN747 to $1 and N909 to $1. Since then, the value of the naira has kept deteriorating. In a bid to stop this continued depreciation in January 2024, the CBNinjected $500 million into the country’s forex to clear some backlogs....CONTINUE READING THE ARTICLE FROM THE SOURCE

The Economic and FinancialCrimes Commission (EFCC) alsoarrested some Bureau de Change (BDC) operators across the country in February to augment efforts to strengthen the naira. That same month, the CBN said it would sell $20,000 to licensed BDC operators to meet the increasing demand for dollars.Despitethese various moves by the CBN, the naira has continued to depreciate. In this interview with FIJ reporter Abimbola Abatta, Mikael Bernard, a crypto market analyst, shares why the apex bank’s move to strengthen the naira failed.

Why did Cardoso’s moves to strengthen the naira fail? How would you assess the moves made so far?

The problem with Cardoso’s policies is that they were designed to defend the naira. Everything was a short-term fix, designed to manipulate the market and artificially strengthen the naira.

This is myopic because the real problem isn’t the naira-dollar rate but inflation and a collapsing economy. These things cannot be policied away.

You have to actually do real-life work, grow local production and maximise our natural resources and exports. You cannot policy away systemic structures of wickedness.
How did internal and external factors affect these strategies? Can you mention some?

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I don’t think his strategies were affected. I believe they did what they were meant to do, to manipulate the market in the short term and buy some time for the fiscal side, that is the Ministry of Finance, to rectify issues.

They all knew it would come to this, but for this government, temporal gains and propaganda are more important than solving problems.

His policies were about buying time and ensuring the naira did not collapse below N1500 per dollar, because that would have crumbled a lot of businesses and even the government’s ability to repay loans.
What do you think the CBN could have done better to save the naira?

I’d be frank. There’s nothing that the CBN can do to save the naira. The naira is not the problem. It’s a symptom of a deep underlying problem. The real problem is the lack of production in Nigeria, which is caused by the failure of the government to provide a conducive business environment.

Nigeria does not incentivise production. If you open a business, they extort you to bankruptcy. If you try exporting, they frustrate you. No infrastructure, financing, security, legal protection or support for production. The result is a constant reduction in the GDP and a total collapse of the economy.

Nigeria is broke; the naira is just a symptom of the unproductive nature of Nigeria. It cannot be saved via manipulation or kidnapping of expatriates. It can only be saved by moving from consumption to export-oriented production.
Do you think the naira can be saved at all? If yes, what practical steps can the CBN, government and other stakeholders take to ensure that it is strengthened?

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Can the naira be saved? At the moment, yes, by tackling insecurity and selling more crude oil.

However, if the status quo remains the same for the next two or three years, the naira will lose its ‘fiduciarity’. By this, I mean, that people will stop trusting the naira, and since the value of fiat is based on trust, it would get to a point of no return.

The solution to the naira isn’t solely in the CBN; it’s in the entire Tinubu government. If they don’t leave propaganda and focus on governance, the naira will soon become worthless.
Any key takeaways from the failed attempts to strengthen the naira?

The lesson is that you cannotpolicyyour way out of systemic wickedness. You have to dismantle the structures of criminality before trying to pass policies.

It’s also another lesson that propaganda and shortcuts don’t work in economics. You can deceive your gullible followers, but you can’t deceive reality. Trying to kidnap your way into a strong naira will never work, especially when the government itself is the leading cause of the naira crash.

Finally, Nigerians must learn that strong, independent institutions are very crucial for our survival. You don’t want to have a CBN governor like Cardoso, who considers himself a part of the All Progressives Congress (APC) and passes policies for propaganda wins. The CBN has to be independent, not a money-printed press for a corrupt government.
In your opinion, what are the implications of the naira’s continued weakness on the economy, and, of course, cost of living?

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I’d say the naira is a symptom of a crumbling economy rather than the economy being a symptom of a crumbling naira.

Inflation in Nigeria is primarily driven by high costs of the factors of production. To produce, you need land, labour, entrepreneurship and capital. All of these are extremely expensive right now. Getting loans for business in Nigeria is ridiculously expensive because the CBN raised interest rates to a ridiculous level, making it impossible for businesses to get financing.

Land, which includes factories, electricity and road network, among others, is expensive due to a lack of raw materials, bad road network, demolition of properties and insecurity.

Entrepreneurs are barely surviving and are fleeing the country in droves, while labour is undertrained and unable to even earn a fair wage. Until production is fixed and Nigeria can produce enough things to export and earn FX, the naira will keep crumbling against other currencies.

As I said earlier, it’s not something Cardoso will sit in his office and solve. It’s something that the entire federal government has to do on the field. It’s a failure of government, not a failure of the naira.

Those betting against the naira are simply betting on the inability of this government, due to its own corruption, to boost production. If Nigeria can produce enough to export and earn FX, we won’t be talking about a collapsing naira.