Controlling Forex market with guns is height of insanity

On the long list of bizarre happenings this year, this should easily take the cake.

ALSO READ: DSS raids parallel market operators, arrests dealers selling over N400/Dollar

One BDC trader captured the horror scenario this way: “I learnt that the DSS are going round BDCs. Yesterday they went to Airport and the Hajj camp, warning them about buying and selling exchange rate. If you sell above N385 per dollar, they will arrest you. So, the whole market is paralysed.

“Nobody is buying; nobody is selling because you don’t know who you may be transacting with. If anybody asks for dollars, you tell them you don’t have. They want people to be hoarding dollars, and this will strengthen the roadside currency hawkers because when people cannot buy from BDCs, they will be forced to patronise black market operators.”

CBN recently issued a policy which allows each BDC to purchase Dollars from Travelex at N381 per dollar and to sell to end users at a maximum of N400 per dollar.

But that policy apparently hasn’t worked as the CBN would have liked.

The Dollar has been trading for closer to N500 in the last couple of weeks.

Another BDC trader lamented: “On Monday, called so many licensed BDC operators. The issue is that they feel we are unnecessarily hiking the rates. But it’s not our fault.

“Right now, their focus is on our business; they have been calling us one by one and we don’t want problem. That is why we have agreed to have a fixed rate for now.

“After the raid in Lagos, we the Abuja operators met and agreed on a fixed rate so that such will not happen to our members”.

The monetary policy arm of the President Muhammadu Buhari administration really thinks raiding the parallel market with guns will lower the exchange rate? Like seriously?

There’s nowhere else in the world where this happens.

Those who suggest that there’s a grey matter deficit in the Buhari administration and at the CBN, may just be right on the money (pun intended).

At a CBN Forex policy dialogue this month, Emmanuel Ukeje who is the Special Adviser to the CBN Governor, couldn’t explain whether his organisation was running a currency float or a devaluation.

ALSO READ: How Economists ripped CBN boss apart in Lagos

“We are operating a flexible exchange rate that is managed. We should be wary of absolute devaluation”, Ukeje said flatly.

In June, the CBN unveiled what it called a “flexible foreign exchange policy”, with plenty of fanfare.

At the crux of this new policy was the idea of “market forces” determining the value of the Naira. It was sold as one where factors like demand and supply will shape the Forex market and largely determine the value of the Naira.

“We are optimistic that the steps we have taken today will further deepen the market and help get foreign exchange into the market. I will say to Nigerians be calm, there is no need to worry, everything is well,” Emefiele had said after the unveiling.

Emefiele hasn't taken his own advice.

To calm Nigerians by raiding the parallel market with guns and jackboots is insane, daft economics.

This is the ‘command and control’ economy former Nigerian Minister, Obiageli Ezekwesili, famously accused Buhari of running.

It’s foolish economics to want to rig the market—to want to fix your own market.

The CBN should only intervene when the market is going crazy, as it is right now. But not with guns for Chrissake!

At the CBN Forex dialogue referenced earlier, renowned economists like Bismarck Rewane and Ayo Teriba, accused the CBN of always causing panic and uncertainty in the market. In the views of these economists, CBN’s market interventions have only helped in depreciating the local currency some more.

This week’s raids on shops and sidewalks, vindicates these guys.

To help the Naira appreciate, we have to start exporting finished goods and actually diversify our economy.

Thus far, all the Buhari administration has done is parroting these ideas without actually articulating how it will be done or without actually taking concrete steps to diversify.

It's been all talk and no action from the nation's seat of power.

To raid BDC outposts this week in a bid to fix our ailing economy was one joke taken too far. It was utterly ridiculous, for want of a better expression.

Whoever issued that order to have money changers at gunpoint in order to fix a faltering economy, shouldn’t be having a job right now.