 Great to have you back on the breakfast. Now let's move into our first major conversation for today. We are talking about Nigeria's economy, mostly with regards to the exchange rate. This morning we're going to be speaking with Nick Agouli. We also expect another economist to join us, but of course we'll introduce him when he gets here. Mr. Agouli, good morning. Thanks for joining us. Good morning. Thank you very much for having me on the program. This is a conversation that we've had multiple, multiple times. And of course, you know, it's pretty much the same angles that have been looked at with regards, you know, why the exchange rate doesn't seem to be improving and it doesn't seem like the Nigerian government understands clearly enough the things that need to be done to help, you know, fix the challenges with Nigeria, the value of the Naira and of course our exchange rate. So I want us to go through it one more, you know, once again, your thoughts and I saw that you put out a report also sharing your views on why you didn't agree with the moves by the, you know, Nigerian government and of course also the vice president. So quickly share with us, you know, once again, from your perspective, what do you think we still are getting wrong? Because obviously the suspension of Aboki effects hasn't fixed much. Thank you very much. First and foremost, I did agree in my article with the vice president. I would disagree with Professor Obadan, I believe. Okay, yes. Professor Obadan, my lecturer at the University of Benin, I did not agree with him. So we'll talk about that. But to set the stage, I would like to say that it's an interesting country. Nigeria is the place where those who have been given equity parts to rule this country create crises and then they spend tons of time trying to address these crises. I mean, it's like they decide to create a flood and then spend their entire four or eight years in office to try to take care of this flood. And how do I mean? I can give you a few examples. So for instance, number one, we have refineries. We have allowed these refineries to rot. So we have created a crisis. And now it means we have to go and import petrol. And from that petrol importation, we've created another crisis of fuel subsidy. So every government comes in spending so much time on fuel subsidy. You keep hearing fuel subsidy, fuel subsidy. It is a crisis they have created. If the refineries were working, we would not be talking about fuel subsidy. It's the same way we have created a crisis in agriculture. We have land. We are not cultivating the land. So we now have to import food. And importing food means we need a lot of money to import the food. And the money is dollars. And that is affecting the exchange rate, which we are now spending time to address. It's the same with gas. We produce gas. And then we create a crisis by setting the gas on fire. And when the gas is set on fire, it means we are not using the gas to produce electricity. And then Nigerian officials continue to talk about electricity, electricity tariffs, power costs, all of that. Why? Because we created a crisis by burning our gas. In fact, we now look for money after burning our gas to go and import gas from as far as the United States. And we need dollars to go and import these gas. And because we're using Naira and chasing the dollar to go and import gas, we're not having a foreign exchange crisis. So instead of addressing the fact that we are flaring gas and we are not going to buy gas, the Nigerian officials keep talking about foreign exchange, foreign exchange, talking about foreign, the reason is that you are flaring your gas. If you're not flaring your gas, there's no way you'll be looking for dollars to go and import gas. So these are just a few examples I'm giving. There are many other areas in Nigeria where officials create crisis and then they spend all their time in office trying to deal with the crisis that they have created. So for Nigerian foreign exchange, specifically as we're discussing today, the risk of a currency against another currency is simply the same way we go to the market and buy yams. If you have a lot of harvest and there are so many yams, in fact the good example is that during harvest time in Nigeria, when farmers are just freshly harvesting yams out of the market, if you go to the market, the yields are cheaper because there's so much yams in the market compared to the quantity that people are needing. But the time the harvest season is finished and the yams are gradually getting out of stock, the price of yams begins to go up because the demand for yams is not more than the supply of yams since the harvest season has ended. That is simply how you price the commodity. It is not different with the currency. So the value of the dollar is dependent on the demand for the dollar. So long as Nigerians are demanding more dollars, the price of the dollar is going to go up. So foreign exchange rates is the price of the dollar. If there was small dollars in the market, as we mean Nigeria was a country where we are producing so much food and we are selling it, meaning people bring dollars into Nigeria to buy food, people bring dollars into Nigeria to buy gas, people bring dollars into Nigeria to for tourism and all of that, Nigeria would be awash with dollars. It would be like the harvest season for yams and the price of the dollar will crash. But because we are not doing any of those, it then means that there is so much Naira chasing the dollars. People are using Naira to look for dollars to pay school fees. Looking for Naira in Naira to look for dollars to pay hospital fees. Using Naira to look for dollars to go and buy gas. Using Naira to look for dollars to go and import petrol, diesel and kerosene. Using Naira to look for dollars to go on holidays to pay mortgages abroad. There is nothing that can be done that the price of the dollar will be low. There is nothing, absolutely nothing. If it is not the harvest season for yams, there is absolutely nothing a government can do to bring down the price of yams. And that is the same with the dollar. So what we are dealing with here is that we are dealing with the government that is packing water out of a flooded room. And what I heard the vice presidency which has supported him is that let us leave water packing. Let us approach the source of the flood in the room and lock up that source. Once we lock up that source, the flooding will just go on its own. And it will mean between we leave water packing out of the room to approach the source of the flood and deal with it. The water levels in the room may increase. That means that we will be suffering and pay. But it is necessary for that suffering and pay to be in place for us to deal with the cost of this foreign exchange debacle. Because sometimes doctors will have to amputate limbs. They remove your hand or leg because they want to save you. So if Nigerians are not ready for amputation as suggested by the vice president, will we continue to have this foreign exchange debate and debacle even post this administration? Okay. So are you saying that gas flaring is responsible for the different or multiple exchange rate that we have? Because it seems like we do have fixed and floating exchange rate. Thank you very much for your question. So your question, I will answer your question in two parts. There is the dual exchange rate policy that we're running in Nigeria. The so-called official market and the primary market. I will come to that. But before I come to that, let me address the question from the gas flaring perspective. The gas flaring is not responsible for the dual exchange rates. The dual exchange rate is a creation of the central bank. And I will talk about that. But the way gas flaring is affecting or impacting on the exchange rate is that because we're producing gas and we are flaring it, it means we don't have electricity. If that gas that we are flaring, we're converted into electricity, we have factories open, businesses to open. Even in our homes, we will not need generators. You know, what that means is that we're using Naira, the generators that we buy in Naira here in Nigeria. The importers are looking for dollars to go and import them. Importers are looking for dollars to go and buy every other thing that we consume in Nigeria because there is no electricity and the factories have closed. So if we were not flaring gas, that means we would have been using that gas to generate electricity. Nigeria is an economy which by global standards needs 200,000 megawatts of electricity to function optimally. How much are we supplying to that economy? 4,000 megawatts. We're not talking 40,000. 4,000 megawatts for an economy that needs 200,000 megawatts. And that is what has killed the productive sector of the economy, meaning we are now consuming foreign goods. And because we're consuming foreign goods, there is a lot of pressure on the Naira because people are perpetually carrying Naira about looking for dollars. That is how gas flaring has affected the foreign exchange rate. When we come to the dual exchange rate, the dual exchange rate is a creation of the central bank of Nigeria and it's exactly what I was talking about. We are officials deliberately created crises and they spend all their time managing these crises. There are other nations that we aspire to be developed like them. They don't have dual exchange rate. They simply have no dual exchange rate. I live in the United Kingdom. I will tell you what is happening there because it is an experience that I go through every day. If I have pounds in the United Kingdom, which is their currency, their local currency, and I need dollars or I need euros, I go to a bureau of the change. That is the role of a bureau of the change. Or I go to my bank and I give them my pounds and then they give me the euros or they give me the dollars. It has nothing to do with the central bank of the United Kingdom called the Bank of England. Where does the bureau of the change or the bank get the euro or the dollar they are giving me? They are getting it from their customers. Some of their customers, their business ends them euros or their business ends them dollars. So they have those euros and dollars in their account with the bank. I want to bring my pounds. The bank simply exchanges these dollars and euros and gives it to me because the other customer too, when he sold the euros, he wants pounds to be able to pay his local cost. This is the way foreign exchange is done everywhere else. Come to Nigeria, we have a situation where the government says, okay, anytime we go and sell kudoya and we make dollars, the central bank now becomes a bureau of the change. Central bank abandons its traditional role of monetary policy and maintaining financial system stability and turns itself into a central bank that lays out a list of items that say, okay, if it is school fees, if it is travel, if it is hospital, if it is this you want to import, that you want to import, I central bank will give you dollars. Just go and bring the naira. And what happens is that since it is not all the items that people want to import that are on the central bank list, it then means that another market has to be created for those items that are not on the central bank list. And that is what created the corollary market. Now, the criminality, the criminality involved in this is that, as of today, I speak to you, the central bank 27 below the change is easily $1,415 naira to some privileged people. So give them $1,415 and that dollar is coming from our oil sales to all Nigerians. They take it and give it to some privileged people. The privileged people just simply round strip these dollars into the parallel market where people who need are not on the central bank official list are looking for dollars. And they sell the dollars at $570,000, $580,000 naira, a dollar. They are making profit of $160,000 naira if somebody who is privileged lays his hands on $1 million in the central bank so-called official market and brings that $1 million to the parallel market. That man, we make a $160 million naira gain without doing anything. Without lifting his finger, without contributing anything to Nigeria's economy, he simply took our dollars, good oil sales dollars from the official market to the parallel market and he has walked away with the $160 million naira of a million. This is what the central bank of Nigeria has done. And this is what the vice president said, stop doing this thing. Let us have a market of those who want to sell their dollars and those who want to buy dollars. Central bank, stop being a below the change so that we can now know the true value of the dollar. The problem here is that there are people who are making humongous money from this central bank criminal enterprise and they all came upon the vice president with all their power to try and musul him, musul his speech because he's attacking their source of bread and butter. All right, Mr. Agole. So we can cover as many more areas as possible. Since you're already talking about the different exchange rates, I want you to share your thoughts on the one of the stories in the news. It's the minister of finance, you know, making plans to balance out both the official and official exchange rates, the plans to close that gap. Do you think that that is possible seeing the current realities in the country and also share your thoughts on, you know, those who say that the parallel market rate is the actual value of the Naira, not the official market rate that the government claims? You have asked very two good questions and I'm going to take them one after the other. The first question is the minister of finance saying they are making efforts to try and bridge the gap, close the gap between the so-called official market rate and the parallel market. I want to tell you and I hope the minister of finance gets to hear me that she is going to fail. She is going to fail. previous administrations have tried the same thing and they have failed. What is needed is not to bridge the gap between the two markets. What is needed is to close the market, close one market, close that official market. The central bank must stop being a bureau of exchange. The central bank just needs to focus on their duty as monetary policy experts and maintaining financial stability and issuing our currency and being a banker to the government. Those are the container objectives of the central bank. There is no central bank in the world that toss itself in the bureau of exchange issuing dollars out of foreign reserves of the country. Imagine the Bank of England draining the foreign reserves of the United Kingdom to issue euros to British who want to travel to Europe for holidays. That is arrest nonsense. So the minister of finance, if she knows what she is saying, she will be talking about bridging the gap because the gap can never be bridged. If today, let me tell you something. Today, the official market is 415. I think I read the report somewhere saying they moved it to 420 and the parallel market is 570 or 580. If the central bank tomorrow says the official market rate is 500, I can assure you that the parallel market will hike their own price to about 650. This is what has been happening since the dollar was less than one Naira. We used to less than one Naira to buy a dollar before. The same dollar were used in 570 now. So the minister of finance, Ihar Ro, as the chief economy manager of Nigeria must seize the bull by the horse by stopping this dual exchange rate. Let us have one market, a market of those with dollars who need Naira and a market of those with Naira who need dollars. Let them interact in a single market. That is the way it is done elsewhere. Number two, your question is that people say the parallel market rate is the one that reflects the reality. And I agree with you. The parallel market is the real market. The official market that is being run by the central bank is a body market that I don't know how to describe it, but look, if you ask the central bank of not today, how did you arrive at 415? The last time, or 414, he cannot give you a cogent answer. He just sat in his office and said, oh, oh, I'm doing demand management. Since people are looking for dollars tomorrow, let us hike this thing. So there's no actual way to prove how they came up with that figure? The central bank cannot tell you. I cannot show you. This government came into power Look, in the Jonathan days, the dollar was 150 Naira. 150 Naira, a dollar, a Jonathan days until when the election cycle in 2015 started, the dollar and depreciated. The so-called official rate went to about 190. I think as of the day that Jonathan was heading over, it was 199. The central bank governor, and you see the same person who is in power, he came from Jonathan days into the Bawari days. The central bank governor has presided over that 150 to 415 today. Ask him, how are you determining this your own official rate? He cannot give you a cogent answer. I cannot show you of that. But the parallel market is a real market because that is the market of those who are not privileged, who don't have access to the official dollar that are going to. So what needs to be done is to cross down these two markets. I have a single market, a market that if I have dollars and I need Naira, I go there to one semi dollars. A market that if you want dollars and you have Naira, you go there and you buy your market and the participants in that market will include government, all your companies that and almost all their revenue in dollars. That's for remittances, exporters that are bringing in their dollars. These are people who will be supplying dollars to the market and then do also $1 to anything, school fees, travel, medical, mortgage, all of that. They have to enter the market and buy the dollar at the market rate. This is what is obtainable elsewhere. The central bank has created a risk seeking mechanism of having these two markets. The minister of finance must close down these two markets. That is exactly what the vice president was saying. And secondly, like I said, the parallel market as of today is the real market. It is actually the real market because let me tell you one thing. The central bank turning itself into a bureau, the change depends on the NNPC to bring the dollars in because the NNPC is the one that says our crude oil and ends the dollars. But because the refineries are dead, we have allowed them to die. That's how we create crisis. We allowed our four refineries to die. The NNPC, when the NNAS said our crude oil and make dollars, they use the whole dollars to import petroleum products. So they are no longer putting anything much into the central bank for the central bank government to do his bureau, the change. And that is what is causing this crisis. There is no dollar, no dollar in central bank votes because the NNPC is not dropping anything. So what the vice president was who was that? Let us close this market, have one market so that it will encourage other people to bring money and drop in. It will encourage the supply of dollars in the market. This is exactly what he was saying. And now some K-Mongeras, those who are benefiting from this scam, from this criminal enterprise, they have come upon the vice president before he's trying to remove food from a mouth. They are saying the vice president asked for devaluation. Who told them it's going to be devaluation? If you have only one market and there is a lot of supply of dollars in that market, that market can actually strengthen the Naira. It can strengthen the Naira. A foreign H&M market is never one way. At a time, the dollar to the pound, you needed two dollars almost to buy one pound. Today, you only need like $1.30 or at most $1.50 to buy the pound. So the market goes up and down. So the vice president's suggestion could as well make the Naira weaker or make the Naira stronger. Just let the market operate. That is what is needed. Are you with me? Yes, I can hear you. I'm saying it pretty much sounds like if we don't make proper adjustments and do the things that are necessary, you may never actually get to fix some of all these challenges with the... Okay. So it feels like this conversation might never end. But however, I was hoping that we're able to talk about the positives of all of this. I don't know if you still have a few more minutes to say that in the midst of all of this, I know that the government is trying to achieve balance of payment deficit. However, ensuring that there is import reduction, don't you think that that might just help us look inwards, help local production, and for us to be self-sufficient, I'm thinking. In fact, let me answer both of you in a nutshell. I agree with you, because what is needed are fundamental systemic changes, definitely. And that is why I agree with the vice president. The only thing is that this thing is going to come with some pains. It will require sacrifice. And as Nigeria, we must be prepared to enjoy the... We must be prepared to allow some of our lives to be amputated so that our lives can be saved. And now, secondly, yes, I agree with you. I agree with you because instead of spending time fighting the exchange rate, let us go back to the basis. The question is why are we demanding so much dollars? We're demanding so much dollars because we're importing everything that we need. The clothes we wear, the jewelry, the food we eat, the medical equipment, the cars we drive, the airplanes that we buy, everything is being imported. So if we go back to the basics and let's start with power supply, move this country's power supply from this measly 4,000 megawatts now to even 40,000 or 50,000 megawatts, as you will see the factories will come back to life. And once the factories come back to life, they will start producing locally the things that we need. And once they start producing locally the things that we need, Nigeria is no longer having needs for the dollar to go and import. And that will stop the problem. Make our schools to be great. Nigeria won't think it's abroad again. Make our healthcare sector to be great. Nigeria's will need to go abroad again for medical care. Make our country to be secure, to have security. And Nigeria's will need to go to Disney World again. Instead, we have Europeans, Americans coming to Nigeria to come and enjoy holidays and leave their dollars behind. So this real issue, why I agree with you is that it's not the exchange rate that we should be fighting. We should go and fight fundamentally the things that are killing our economy. Once we bring the economy back to productive life, the issue of exchange rate, we don't die a natural death. It will not even come on the lives of the central bank governor or minister of finance again. Agouli, I guess I can say I'm looking forward to another conversation like this again because this was pretty interesting and properly explained and detailed. We hope that the minister of finance actually does understand some of these perspectives and also that the vice president's message is not just worded but also really gets to the central bank of Nigeria governor and some of these steps are taken. But thanks for your work and for always taking our time to speak with us and to share with us. Good morning once again. Thank you very much. I have a nice day. You too. Thank you. We of course, for those who have been following social media, there have been 20 days of activism started on the 1st of October 2021. It was all mostly in remembrance and in memorial of the events of this same month in 2020, the Ansar's protest which eventually, of course, I'm not sure everyone remembers what happened on the 20th of October 2020. We're going to be getting that conversation going next to share with our viewers what exactly the plans are with the 20 days of activism and the little details here and there that are important to know. That comes up right after the short break.