 Welcome once again to the Breakfast and Plusty v Africa. Our next conversation is going to the value of the Naira. Reports have it yesterday that the Naira was exchanging that between 543 or 545 Naira to the dollar. The Nigerian government has, over time, made different moves and set up committees, created new laws with regards to protecting the Naira from its freefall that we're currently witnessing. But that doesn't seem to be working because we can this morning with an economist, Mouda Yusuf, who's a former DG of the Lagos Chamber of Commerce and Industry. Good morning and thanks for joining us. Good morning. Good morning and thank you for having me. Alright, you're welcome. So I'm going to get you to start with your views on what seems to be going on with the Naira. We maybe weren't expecting it to be this bad a few years ago, but we're currently at 543 or 545 and there are fears that it might even hit 600 and more in the next few months. What seems to be going on? Well, what is going on, we can say, is a combination of factors. The combination of factors such as the capacity of the economy to generate foreign exchange. Then there is also a regulatory or policy dimension to it. So basically, it's a combination of those two factors. The capacity to generate foreign exchange to meet the demand and the appropriateness of policy framework that will inspire confidence and ensure stability in the foreign exchange market. Don't forget, exchange rate is a price. And in elementary economics, the price is determined by demand and supply. So you have factors on the demand side, which is very heavy because of the demand for all manner of things that we import. They have factors on the supply side, which has to do with variables around those economic activities that generate foreign exchange. Then there is the top leg of it, which is the monetary factor. That is how we manage the economy, especially around monetary policy and around the financing of a deficit by the central bank. That also has an influence on what you call money supply. So if the money supply is getting too high, it has a way of affecting both inflation and the exchange rate. So basically, we will locate what is happening around those three critical factors. As a progress, we can elaborate on the key elements of each of those factors. Okay, so Mr. Yusuf, let's start with a focus on the policies and policy framework of the Nigerian government, the CBN government inclusive and also setting economic teams that have been set up over time. There have been certain policies that were at first a little shocking to Nigerian people by the CBN governor. These policies were at that time meant to help stop the free fall of the Naira and to give the Naira more value. But these don't seem to be working. So would you say that the policies have failed to address these challenges or the CBN just didn't time these policies perfectly? What I would say is that we have some major shortcomings with the policy. Generally, the kind of policy framework that is being adopted is what you call or what you can describe as an administrative allocation of foreign exchange as opposed to a market-based framework for the management of foreign exchange. Administrative allocation is generally and typically very, very challenging because when you fix your rates, what we have now essentially is administrative fixing of the exchange rates. When you fix your rates at a level that the supplier cannot support, then you find yourself in a situation where you begin to rush on foreign exchange. And the immediate impact of that, first, because the rate is artificial, I'm talking of the official window rate now. Because the rate is artificial and it doesn't reflect fundamentals, it requires a lot of speculation, it attracts a lot of parasites, a lot of people who have some influence and all of that to get the foreign exchange because there is the opportunity of ramp-tripping the foreign exchange. Now, the official window now is around 4.11. The open market rate now is around 5.8. You can see the gap. Once you have this kind of gap, you have a subsidy challenge. That is what you call the subsidized exchange rate. And once you have that, you see a lot of scramble of foreign exchange. Even from people who don't have any signals needed for them. They are in the market because they want to take advantage of the premium between that official window and the open market rate. That is one problem with the current policy. The second problem is that when you fix the rates, you know what is regarded as the market rate. Those that are supposed to bring foreign exchange into the economy will not bring those foreign exchange. Because how will you bring your foreign exchange when you know that the open market rate is 5.38 and your authorities are saying that you should bring your foreign exchange at 4.11. This is a disadvantage to supply. So when you have this kind of things, you create a major crisis. You create a problem on the supply side because people who are supposed to bring in the supply and I can name them like the oil and gas companies, like the embassies. You have foreign direct investment. You have foreign portfolio investment. You have export processes. You have the gas products and the chances. You have the embassies. All of these are channels through which foreign exchange is coming. But if you are imposing a rate on debt that if they bring in the foreign exchange, you will be extending for them at 4.11. Two things will happen. Is that they don't bring it at all or they bring it under the table? Which is the crisis we are having. So what if you have a market-based mechanism? A less regulated system. Here you allow the markets to determine this. You are allowing them to see a much better improvement on the supply side. That is a bad supply. Now on the demand side, one of the biggest pressures we are having on the foreign exchange is in the position of petrol and products. Our refiners are not working. The dangote refinery is there to come on stream. And we are consuming, as there are some figures now, ranging between 19 million to 100 million liters every day. That is a lot of pressure on our foreign exchange. And because the government doesn't want a crisis, around Fuwa, Kiwis and all of that, government keeps pumping a lot of foreign exchange to the position of petrol and products. There are also arguments that Nigeria itself may not really consume as much as 90 million liters. And so there are also some challenges with those figures and the need to also cut them down. But go ahead. And I want you to also add to your thoughts. The point is that once you cut, that is another pricing problem. Because the price of fuel is also heavily subsidized, it is far cheaper than the fuel that we have in our neighboring countries. So what happens is that once the fuel comes in, before it finds its way into all the countries in the West African subregion, and even sometimes even to North Africa, because you have economic agents who move distance. So these things are putting a lot of pressure on the foreign exchange market. Then if you look at even our manufacturing sector, a lot of the raw materials that are used in manufacturing are also important. Because we don't have a properly functioning petrochemical sector. We have one somewhere in O'Neill or something but the capacity is not enough to be able to cope the demands. So there is a lot of pressure also coming from the manufacturers for their inputs and raw materials. The same thing with the equipment that all economic agents use, whether you are in manufacturing, whether you are in agriculture, whether you are in service sector, those of those marginaries and equipment are important. That's our source of pressure. Then we have finished goods. People buy in all sorts of things, go to China, bring in all sorts of things to be sold. People are cheaper. So we have challenges on the demand side. We have challenges on the supply side. What the CBN has been trying to do is to manage demand. That is why the CBN has been banning some imports, excluding some people from the foreign exchange market and all of that. That is still not achieving the right kind of outcomes because you are not dealing with fundamentals. That's a limit to which you can do. And what we are having now is that most of these foreign exchange transactions are even taking place outside the official system. If you talk to a lot of people now, they get somebody abroad who has foreign exchange. You do a kind of swap. You credit a particular account here. They give you dollars over there. These are all sorts of things that are happening just because we don't allow the market to function. If you allow a better market framework, the situation will not be as bad as it is. Okay. Dr. Mudayisuf, would you argue that Nigeria is currently facing a currency crisis? And more importantly, who would you say profits from the free fall of the Naira? Well, I wouldn't say we can't say this is a currency crisis. I think for me, it's an economic management issue to a larger extent. If we manage the economy better, we will not have the kind of challenges that we are having. Because this economy is very big and it has a lot of opportunities to attract private capital. I'd have to the channel of foreign direct investment, to the channels of foreign portfolio investment, to the channel of export processes, to the oil companies, to the embassies. The opportunities are huge. This market is big. The population is huge. All of these things bring value. So I wouldn't say it's a currency crisis. I think it is an economic management crisis. And now from the monetary management perspective, the rate at which the government or the city is also funding the fiscal deficit of government. When I say that the rate at which the government is following CPN, it's also too high. And when the CPN continues to fund the deficit of gross money to government, it has a way of weakening the currency. Because it boosts the money supply. And once money supply continues to accelerate and output is not growing, then you have a challenge with currency. And that is why there is a lot of problems around the welfare of the people, around the purchasing power, around the inflation. And this is creating a lot of problems around the poverty in the country. Because nominal incomes are not increasing. And prices are increasing. In a ganoping way, there is no greater enemy of the poor than inflation. So, Mr. Doctor, what are you saying? When the economy is declining, and you continue to have these high prices. Some prices have doubled, some prices have tripled in the last one year. So that leads to the next part of my question. We know that the weaker rates seem to boost government revenue earnings regarding oil. So that's why I'm asking, who really stands the profits from all of this? Well, in terms of who is profiting, first, those who are around tripping. Those who have the influence to access foreign exchange in the official window. They are the major beneficiaries. Because many of them get these foreign exchange from the official window and find a way to take advantage of the premium, which is not a legitimate kind of benefit anyway. That is one group of beneficiaries. The other group, which for me is legitimate, is those who are exporters. Even though they have a whole lot of challenges in the processes of exporting. But as an exporter, an exporter benefits from a weakening currency. The weaker the currency, the better for an exporter. Because exporters are earning foreign exchange. So when the exchange rate is weakening, the narrow returns on every export is much bigger. So right now, those who are in the export business are doing very well. If they have the opportunity to export. Every dollar you bring in, you are starting to have 500 Naira. I want us to also look at the CBN governor, Godwin MFLA, and some of the moves that he has made in the last, let's say, one year. The ban on cryptocurrency trading and also the CBN ban on FX to BDCs. How have these affected and also led to this crisis with the Naira that we are currently witnessing? Well, as you can see, we are not getting any concrete results from it. The policies we are working in will not be discussing what we are discussing. Before the expulsion of the BDCs, the rates were less than 500, I think 480, 470, 460 and all of that. Now we have removed the BDCs because we thought that we are the ones who are the problems. The transactions were moved to the banks. Then what are you having now? The situation has further deteriorated. But that is taking back to the issue of addressing fundamentals. What we are dealing with are the symptoms. If you continue to tackle the symptom of the problem, the problem will not go away until you deal with the crisis. And the crisis is the fact that we are fixing an exchange rate at a rate that the market, the supply, cannot support. You create all sorts of problems. So what do you recommend? What do you recommend? The BDCs are not doing it when we removed them. Now the issue is also about the fintech. There has been something around falling as in. Some sanctions were also threatened. Now there was also issues about the banks. Now the banks are being instructed to go and publish the list of people who are coming with market passports. All sorts of problems. It's because we are fighting symptoms. If there are fighting symptoms and you don't deal with the fundamentals, these problems will not go away. So my solution to this is as much as possible. First, is to adopt a market-based foreign exchange management framework. If it is more market-based, if the exchanges are more market-driven, that's one way out of all these challenges. The second is to see how we can accelerate the process of getting our finalists to work. Although that's not a short term thing. Because the pressure that is put on the foreign market is enormous. Thank God we are looking forward to download it. If finally, hopefully, the government is also making efforts to fix our domestic refining. If we are able to do that, it will take a lot of pressure out of a lot of pressure away from the foreign exchange market. And we need to also correct the orientation of our manufacturers as much as possible. We should have an industrial policy that encourages backward integration. The manufacturing system is also not too dependent on imports. If anything, they should be generating foreign exchange. These are some of the things and of course we need to deal with the monetary aspects. The exchange rate is funding fiscal deficit. It's affecting money supply. It's affecting inflation. And it's also contributing to the depreciation of the exchange rates. So you can see that it's a multi-dimensional thing. We want to deal with this problem. I think these are the dimensions that we should be focusing on. Mouda Yusuf, what fears do you have if we don't start to take some of the steps that you've mentioned here? Because, and I've repeatedly said this, that there is an economic management team. There is different committees that have been set up headed by people who you would expect and knowledgeable with managing an economy. But these teams don't seem to be influencing much. So what are your fears if we don't start to take the right steps as quickly as possible? And how would this affect our economy in the next one year? It's already affecting the economy as we speak. Don't you see what the prices are saying? Don't you see the crisis in the market even from the common people? If you go to Enema, you see the way every day they change prices. There's so much uncertainty. So the consequences are already with us. And if you are not careful, it will continue to get worse. So I think it's a question of going back to the joint board. There has to be further engagement. And I know that the economic management team have laid down some very fantastic proposals. But it's wanting to have the proposals. It's another thing to translate those proposals or recommendations into concrete implementation. So we have to go back to the joint board and we also need to engage the stakeholders. Nobody has the monopoly of knowledge. The economic managers, the policymakers should engage with the stakeholders on sectoral basis and on a general basis to address these macroeconomic issues and to also address sector-specific issues. Because all our business is also about holistic management of the economy. So that is what should happen in my view. If we don't do that, the situation will continue to deteriorate and we will continue on this firefighting approach looking for this, going for this, asking for sanctions, bringing the ECC and all of that. Those things cannot give the sustainable solution. Alright. Wudai Yusuf, thank you very much for joining us this morning. We will of course continue to follow the figures with the Naira and the exchange rates. And of course, looking forward to having another conversation with you if things either improve or get worse. We'll have a very interesting Friday ahead. Stay with us. We'll move away from talking about the economy and the Naira to now talk in schools and the Nigeria's out-of-school children seem to be increasing. And also, what the security challenges have led to or have eventually caused with the number of schoolchildren that have been affected. We'll get into that conversation next with, once again, and stay with us.