The Nigerian Chinese Currency Deal, My Own Perspective: — Gboyega Adejumo

By Ikenga Chronicles April 14, 2016

—- Gboyega Adejumo
It is Not about making a statement out of politics on preferences, but for the simple fact that finally after a period of 11 months, an 11 month interregnum period, devoid of any policy making by the Buhari administration since it came into being, finally we have a policy direction, and in the economic sector too.
My main problem with the Buhari administration has always been his intellectual limitations and clear lack of capacity to handle a Nigeria, that has to be dynamic to survive the vigorous aesthetics, the new world economic philosophy that simply leaves behind nations that cannot grasp it’s content, nations not pragmatic enough to cope with the rigours of a new world economic order.

I became quite aware of the new economic trends and the consequences these will impact on Nigeria, about year 2000, as my participation in activities involving the Multilateral organs, such as the World Bank, IFAD, IBRD, UNESCO, brought a certain awareness of the kind that totally changes one’s exposure and perception to how rising economies evolve and why some are relegated.
The previous decades, the 80s and 90s witnessed the evolution of the Asian Tigers, of which many views have been expressed but one view at least is certain and sacrosanct – The Asian Economy stood up to The Bretton Woods agreement, the landmark system for monetary and exchange rate management established in 1944, upon which world’s economies are regulated and which clearly favors producing countries over non producing countries..
I have in the course of being a procurement consultant to the world Bank handled, International Competitive Bidding, ICB, which actually states that, a borrower country should always be the focal point of procurement of goods and services, and it is only if such goods and services are not readily available in such a borrower country that procurement is then sourced or outsourced outside of that country.
So, when I handled the procurement for The Root and Tuber Expansion Program, RTEP, even the simplest of tools and vehicles had to be procured abroad. Sad!
And that is why I am absolutely unhappy with a Buhari government that has not patronized Made in Nigeria vehicles to help grow our Automobile Industry.

I had a unique opportunity sometime in 2006 or 2007, to spend some Fruitful hours with Chief Richard Akinjide, mainly on the New world Economic Order. He had also written a book he had promised to give to me, a signed(autographed) copy.
I came with my safely national and international experience, he, Chief Richard Akinjide simply provided a wider pragmatic and first hand Exposure. He gave me a great lecture on IMF and unending cycle of indebtedness, to which all nations are exposed….. .
We had such a thorough discourse that I had to agree with the late Chief Obafemi Awolowo, who said in 1979, that Chief Richard Akinjide was a far more worthy and better Presidential material than Shehu Shagari.

Breaking away, at least in principle was what the Asian Tigers did – The early 1960s, saw the U.S. dollar’s fixed value against gold, under the Bretton Woods system of fixed exchange rates, simply made the Dollar, the world currency.
Every other currency could only be convertible, Pound Sterling, Italian Lira, French Francs, Soviet Ruble, Japanese Yen and Chinese Yuan.
We all know what became of the Italian Lira!

I was in Italy just at the time the European Union currency was been promoted as an idea, the Lira then had sunk to L1000 to $1. The Euro, €, practically saved the Italian economy. I was back in Italy in 2011 and there was No Lira and the Lira never again can be used.

In the middle to late 70s, the Naira had such convertibility that many trades were carried out in the West African Region with it and was the main currency at Makola market in the heart of Accra, Ghana!
A former CBN governor Late Abdulkadir Ahmed, during the time of General Ibrahim Babangida, muted the idea of the Naira not just as a regional currency, but also that of a world convertible currency. That was when the Japanese Yen suddenly started to enjoy a phenomenal attention as a possible alternative to the Dollar as a Co world currency.
The Yen failed, and with it the Great dream of an Asian Tiger world currency, but those Asian countries are now industrial giants in their own rights.

The Yen failed, mainly due to the TWO Bretton Woods Creations of the IMF and the World Bank that still fixes considerably the world’s exchange rate, though officially the strict world’s exchange rate regime, stopped in the 70s, however as it is, even the marker forces as a determinant to rates are strictly controlled by the power of balance of trade, which favors more, the industrialized nations…

Enter The Chinese into the new world economic order on which a massive industrial revolution began a longer time than given.
China has through the policy of chairman Mao, to lock up China from within and then force the concept of necessity becomes the father of invention on the people, set a sure path to Economic Growth and industrialization .
But his, was a Big government and the collapse of a Big government Soviet Union simply explains the very limited success of chairman Max’s China. The origins and evolution of China’s industrial policy, however, have so far received only limited attention in our clime simply because we are a consuming nation first, and second, a very irrational and discriminatory people craving for known brands and social correctness by identifying with Western products. This has been our Greatest foible.
What China simply did was to modify their original big government policy by allowing a much larger participation by the private sector, while state and regional government continue to hold negligible shares and varied controls….
Having broken the industrial barrier, the Chinese are after the only vestiges of the Bretton Woods agreement left, the Overthrow of the Dollar or at least a co world, currency with the dollar as the world’s currency exchange, not just convertibility, and that will be the World’s foreign reserves also in Yuan, just as the Dollar replaced gold as Word’s foreign reserve.

Enter President Jonathan, between May 6th 2010-May 29th 2015!
Jonathan worked!
He had a good team of Economists who understood the situation very well. China had by these times also, started to court the attention of of African countries and markets, careful enough Not to make the same mistakes that the West, notably America has been making toward Africa – The tendency for the West to Disrespect Africa and African leaders by putting stringent and difficult value system into any forms of aid, Grant and Loans, capping it all by also invoking sanctions on which ever nation, they see through their eyes as even remotely flouting such high and Ethical values.

The Chinese chose to ignore these mistakes of the West. President Jonathan started courting the Chinese and America just didn’t like that. They cut off our oil sales and refused to sell arms to us. Meanwhile Jonathan, through the liaison with China built 37 dams, 4 of which are hydro electricity capable.
A very elaborate rail network of 30,000 kilometers of rail was drawn and to be completed in 30 years.
The Kaduna Abuja is already 100% completed. The Kano Lagos rail, Calabar Lagos rail are all but just details of an elaborate plan which was put in place in 2012 and work started in 2013, with even the now controversial Calabar Lagos rail project flagged off in 2014!

The Chinese had demanded then that we convert part of our foreign reserves to the Yuan, but for reasons which I suspect rests on a strong economy and growth, the obvious displeasure the West would have to this arrangement, Jonathan did Not accept this offer.

Enter, late Joseph Naven Garba, General, foreign affairs minister, and at a time The president of the UN General Assembly, against The Great Henry Kissinger, the American secretary of state, at the period Nigeria was to gain world renowned ascendancy in global politics.
The then General Obasanjo was the Head of State, from 1976-1979!
This period saw a true manifestation of the Africa policy of deviation from the dictates of the western powers on the Angolan crisis between UNITA and MPLA, where Nigeria recognized and backed MPLA against America’s choice of UNITA, and the diplomatic soldiering as Joe Garba called it, that changed the mind of the whole African continent to support Nigeria’s position again the American position became the moment America started taking us seriously.
In his book, “Diplomatic Soldiering”, Joe Garba narrated how Henry Kissinger looked at him and noiselessly when the table was turned against America and he Garba countered by accusing America of Not having a favorable policy toward Africa.
Garba said he was shocked when Kissinger answered him that “Yes, you are right, we don’t have, could you suggest to us what the right policy might be”!
That was some 38 years ago.

Today, again we have chosen to chart a policy that is clearly going to annoy the West, and after a careful analysis, I have chosen to back this policy to have part of our foreign reserves, domiciled in Chinese Yuan and to also be an African clearing house for African Trade in Chinese currency. I have my reasons for taking this position… And in in economic venture, TWO Tests are applicable – Would there be a favorable Return on Investment and would the Risk factor be Minimal and Ridable…. And I think we are good in passing these economic Tests…

First, be it Ghana, America, Chinese or Whoever, Nigeria needs to improve and increase on our balance of Trade, which at the current levels with the West and with China are grossly below par and therefore, unacceptable. At the moment, our capital market base is depleted. Many divestments have occurred, our debt, credit ratios very low, our debt profile since Buhari came in has increased and our economy is truly in the woods. If we can indeed manage an African Clearing House well, it simply means we have a vast African market and domain with which we can grow our capital market base back again and make it safely international.

Secondly, the present exchange rate of the parallel market at N325 to $1, is a recipe for disaster, coupled with our foreign exchanger regime that does not allow easy access to foreign exchange – the result is the heavy strain on the Naira, which is bound to fall, ever more, as Nothing in terms of trade balancing as a sure universal redress exist in this economy. Diversification of our forex interest into the Yuan is thus a buffer on the trade zones, provided our export to China also improves.

Thirdly, we now have a singular opportunity to Kickstart a Nigerian industrial Revolution by creating an avenue to transfer, Steal, imitate and build on Chinese models through a bilateral rather than individual opportunities… Simply put, we now have a partnering, if not a partnership with China and Chinese technology.

There are also risks….
The first risk is the fear of Nigeria becoming a dumping ground for inferior Chinese goods, even the superior ones too, and if we continue to be a consumer nation, our economic growth will be seriously and adversely affected. President Obasanjo was right, when at the Twilight of his tenure, he awarded the Chinese a 30 year contract on rail to be financed solely with crude oil swap at a favorable benchmark, that President Yar’Adua came and cancelled it was one of the greatest mistakes Nigeria ever committed. I am sure the Chinese themselves will not want to commit themselves to such a venture again, just as I am sure Messrs Dangote and Otedola would not again want to buy those refineries Obasanjo cleverly tricked them to buy.
Opportunities come but once.

Again the Risks and danger in an imperfect Balance of Trade are real – Even mighty America has had cause to modulate the American trade balance with China more than a few times in the past ten years. What Nigeria needs at this time is the harnessing, harvesting and husbanding her best brains to draw a series of very elaborate sector policies to enable this opportunity become the much needed lift that the country so needed.
President Buhari, should look across board, he should not be partisan or prebendalist in this regard… He should gather our best best brains to dive this vintage singular economic policy of his, to a logical conclusion.
If he can do this he has my support…

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