When our Mosques and Churches become manufacturing companies then our currency will be very Strong – Abayomi Odunowo
Appreciation and depreciation of currency are not determined by race, color, or the identity of a country’s leadership. Rather, these economic phenomena are rooted in the production of goods and services and the demand for a country’s products in the global market.
The value of a country’s currency is not simply controlled by policies; it is also influenced by the strength of a country’s economy and its ability to produce and export goods. A country that lacks the capability to produce a diverse range of goods will struggle to maintain the value of its currency. This is exemplified by the case of Nigeria, where the demise of over 500 industries within 30 years has contributed to the depreciation of its currency. Relying on policies alone to rectify this situation is futile and unrealistic.
Comparisons to countries such as China, which has a strong economy and a robust manufacturing sector, are misguided. China’s strategy of depreciating its currency is supported by its ability to produce and export goods, whereas Nigeria’s lack of industrial output leaves it at a significant disadvantage.
It is essential for countries to focus on developing their production capabilities and fostering a strong export market in order to maintain the value of their currency. Simply blaming policies or external factors for currency depreciation is not a solution. The true remedy lies in the revitalization of local industries and the promotion of a diverse and competitive economy.
Nigeria is a country where economic mismanagement has become the norm. The recent case of Diezani Alison-Madueke, who was accused of embezzling over $2 billion of public funds, is just one example of the rampant corruption and lack of accountability in the Nigerian government. Another case is that of Attahiru Bafarawa, the former governor of Sokoto State, who was alleged to have spent billions of naira to appease demons.
The money that these individuals have taken from the country is not only a loss in terms of monetary value but also a poison injected into the economic system. It is a waste of resources that could have been used to improve the lives of the Nigerian people. Instead, it has contributed to the country’s economic downfall.
Furthermore, Nigeria’s preference for importation over local production has further exacerbated the economic crisis. By favoring foreign goods over domestic products, the country is not only losing out on potential revenue but also creating unemployment for its own citizens. This not only affects the local economy but also has a negative impact on the country’s overall economic stability.
In order to reverse this trend, Nigeria needs to prioritize local production and crack down on corruption within the government. Only then can the country begin to rebuild its economy and create a more sustainable future for its citizens.
It is indeed astonishing that a country would choose to solely export raw materials without adding any value to them, while at the same time shamelessly discussing the depreciation of its currency. This practice not only demonstrates a lack of vision and foresight but also reflects a gross negligence of economic development and prosperity.
What is even more perplexing is the fact that this country, after exporting its raw materials, later re-imports finished products made from those materials, only to realize that the value has significantly increased. Take for example the case of cocoa, a bag of which can go for N1 million Naira when exported raw, but when processed, its worth skyrockets to around N7 million. This means that even the farmers who produced the raw cocoa are unable to afford the end product, such as chocolate. This is a clear indication of the shortsightedness and lack of economic prudence on the part of the country’s leadership.
Furthermore, the deliberate operation of a banking system that favors loan disbursement to importers at the expense of local industries is truly a recipe for doom. These loans primarily benefit the wealthy elite, such as senators and representatives, rather than the struggling local industrialists who could effectively contribute to the country’s economic growth and development. This systemic neglect of local industries is a clear indication of flawed economic policies and misplaced priorities.
A country that engages in such practices is indeed at the peak of daftness. It is imperative that the government re-evaluate its economic policies and prioritize the development of local industries in order to foster sustainable growth and prosperity for the country as a whole.
The mismanagement and misuse of agricultural loans in a country is not only a sham, but it is also a double tragedy for the economy and the people it seeks to support. When billions of dollars are pumped into the agricultural sector without proper monitoring and evaluation of how the funds are being utilized, it is almost guaranteed that the intended beneficiaries, the real farmers, will not receive the support they need.
In a specific case where an individual collected over N2 billion in agricultural loans, only to divert the funds towards personal luxury and the importation of processed pork, the impact is devastating. Not only are local pork farmers left struggling and potentially unable to compete with imported products, but the drain on foreign exchange reserves adds insult to injury. This kind of mismanagement not only undermines the integrity and effectiveness of the agricultural loan program, but it also hinders the growth and development of local industries, causing a ripple effect throughout the economy.
Moreover, the allocation of exorbitant salaries to a select few privileged politicians, while the majority of the population remains unemployed, only serves to exacerbate the economic disparities within the country. The fact that the national oil company, NNPC, reportedly pays out N10 billion in salaries each month without processing a single drop of petroleum products further highlights the gross mismanagement and lack of value-added production within the system.
Ultimately, the result is a society facing rising crime and criminality, as desperate individuals turn to illicit means to survive. Therefore, it is clear that for a country facing these challenges, discussions about currency depreciation hold little weight without addressing the underlying systemic issues and ensuring proper allocation and utilization of resources.
Investing in a country where government officials demand bribes at every turn can be a frustrating and costly process. The prevalence of corruption not only hinders economic growth and development but also creates a significant barrier to potential investors looking to register businesses and contribute to the local economy. From the moment investors arrive at the airport to the hotel, and even to meetings with high-ranking officials such as Ministers and Governors, the expectation to pay bribes is a pervasive and accepted part of doing business.
The demand for bribes by government officials can significantly increase the cost of investment, impacting the overall profitability of the venture. In some cases, such as in the instance of an investor in Estate Development who was asked to pay 30% of the investment to the State Commissioner for Lands, the level of corruption can reach staggering proportions. This type of behavior not only dissuades potential investors but also perpetuates a cycle of poverty and inequality in the country.
Furthermore, the misuse of government funds, such as those allocated for healthcare and forex, only serves to exacerbate the economic challenges facing the country. The allocation of significant funds for government officials’ travel expenses and pilgrimages, while essential services and industries struggle for resources, further illustrates the detrimental impact of corruption on the country’s economy.
In order to address these issues and attract much-needed investment, it is imperative for the government to address the culture of corruption and implement measures to promote transparency and accountability in business dealings. Only by tackling corruption at its core can the country hope to create a conducive environment for investment and economic growth.
It is a disheartening reality that in many countries, access to Federal Reserves and the ability to obtain loans is not based on merit or the potential for productive contributions to the economy, but rather on the connections that individuals may have. This system perpetuates inequality, stifles true progress, and hinders the potential for widespread economic growth.
In a country where only a select few have access to Federal Reserves and can obtain loans based on their connections rather than their ability to generate tangible value, progress is not the driving force. Instead, it becomes a system that benefits a small, privileged group at the expense of the larger population. This not only breeds resentment and disillusionment but also creates a toxic environment that undermines the foundation of social and economic development.
Furthermore, if a country is in the position to produce goods and services to meet the needs of its population, yet it opts to import these items because it is deemed “cheaper” to do so, the potential for progress and self-sufficiency is impeded. Similarly, if a country has abundant arable land and a youthful population capable of productive labor, but still grapples with hunger and malnutrition, it is clear that the priorities are misplaced. It is not only alarming but also deeply concerning when a country overlooks its own resources and potential in favor of dependency on foreign goods and aid.
A Country that prioritizes connections over merit for access to financial resources and loans, and neglects its own potential for self-sufficiency and economic growth, is not operating with progress in mind. The focus must be shifted towards inclusive economic policies that promote equality and opportunity for all, and that harness the country’s resources and potential for the betterment of the whole population.
In a country where free money flows without control, the inflow and outflow of Forex are often difficult to regulate. This scenario creates an environment where individuals with large sums of money can manipulate the market to their advantage, to the detriment of the economy as a whole.
Imagine a situation where an individual, seeking to hide ill-gotten gains, approaches a Forex dealer to purchase a large sum of hard currency, in this case, $50 million. This money has no economic value and serves only to deprive legitimate companies of the funds they need to import essential raw materials. As a result, these companies are forced to turn to the same Forex dealers at exorbitant prices, further exacerbating the problem.
Furthermore, in such an economy, it is not uncommon for powerful individuals, such as bank owners, to influence the stock market for their own gain. They can inflate the value of their shares within the stock exchange, only to crash them later, and then purchase them back at a fraction of the cost. This type of manipulation can have a devastating impact on the country’s overall economic stability.
In such an environment, it is unlikely that the currency will appreciate, as these manipulative practices only serve to destabilize the market and erode confidence in the economy. In order for a country to thrive, it is essential that measures be put in place to prevent such unregulated flows of money and to ensure a level playing field for all participants in the Forex and stock markets.
A country where banks are involved in round-tripping and inflating costs to siphon money is doomed to face economic downfall and instability. This kind of unethical behavior not only damages the trust and credibility of the banking sector but also has severe repercussions on the overall economy of the country. In this essay, we will explore a hypothetical scenario where a bank engages in round-tripping and inflates the cost of forex exchange for importing machinery, leading to the disappearance of a significant amount of money.
The Scenario:
Let’s consider a scenario where a company wants to import a Caterpillar worth $50,000 for their construction business. They approach a bank to make the necessary forex exchange for the import. However, the bank quotes an exchange rate of $550,000 for the import, which is ten times the actual cost of the machinery. Shockingly, no Caterpillar is imported at last, and the money fades into private accounts. In such a case, who is responsible for straining the forex exchange rate and siphoning the money?
The Bank’s Role:
The bank in this scenario plays a crucial role in straining the forex exchange rate and siphoning the money for personal gain. The unethical practice of round-tripping, which involves buying and selling the same asset to artificially inflate the volume of transactions, allows the bank to create an illusion of increased economic activity and profit from the exchange rate differentials. By inflating the cost of the forex exchange for the import, the bank can siphon off a significant amount of money into private accounts, thereby benefiting from the inflated transaction.
The bank’s involvement in such fraudulent practices not only damages its reputation but also has severe repercussions on the overall economy. The country’s foreign exchange reserves are affected, leading to a depletion of valuable resources that could have been utilized for genuine imports and investments. This kind of unethical behavior also fosters a culture of corruption and dishonesty within the banking sector, eroding the trust and confidence of the public in the financial institutions.
The Company’s Role:
Although the company in this scenario is a victim of the bank’s fraudulent practices, it also bears some responsibility for not conducting due diligence before engaging in the forex exchange for the import. Companies should be vigilant and proactive in ensuring that the forex exchange rates quoted by the bank align with the actual market rates and the cost of the import. While the company may have been unaware of the bank’s unethical practices, it is essential for businesses to exercise caution and skepticism when dealing with financial transactions to avoid falling prey to fraudulent schemes.
The Consequences:
The consequences of banks engaging in round-tripping and siphoning money through inflated forex exchange rates are dire for the country’s economy. Such unethical practices lead to a drain on the foreign exchange reserves, decrease in the value of the local currency, and an increase in inflation. The overall economic stability is compromised, leading to a loss of investor confidence, decrease in foreign investment, and a decline in the country’s credit rating.
Furthermore, the society as a whole suffers from the repercussions of such fraudulent activities, as the funds that could have been utilized for public welfare and development projects are siphoned off into private accounts. This exacerbates income inequality and hinders the country’s progress towards sustainable economic growth and prosperity.
In conclusion, a country where banks are involved in round-tripping and inflating costs to siphon money is destined to face severe economic repercussions. The scenario of a bank inflating the cost of forex exchange for importing a Caterpillar and siphoning the money highlights the detrimental impact of unethical practices on the economy. It is imperative for regulatory authorities, financial institutions, and businesses to work together to combat fraudulent schemes and uphold ethical standards in the banking sector to ensure a stable and prosperous economy.
Otunba Abdulfalil Abayomi Odunowo
National Chairman AATSG
26th January, 2024.