Towing the Zimbabwe way: Ending vicious dollar dependency

WEDNESDAY COLUMN BY USSIJU MEDANER

info@medaner.com, justme4justice@yahoo.com

As a country, we cannot borrow money or pay for foreign goods in our own currency, the naira; we are literally obligated to depend on the dollar, since all of our international trade elements are  done in dollars. This much, it becomes mandatory that we continue to hold national reserves in dollars to ensure a steady supply of imports during a crisis and assure creditors that debt payments denominated in foreign currency can be made, as well as to run our everyday indigenous economy.

Immediately after the end of the Second World War, the US dollar emerged as the world’s principal currency reserve and became globally recognised as the currency for international trade. This immediately and continuously led to the high global demand for the dollar and the dollar became a tool for diplomacy as well as neocolonialism control of the developing nations, majority of which are economically weak to oppose the subordination of their currency by the dominating dollar effect and the collapsing effects on their currencies. Nigeria is one of those nations.

It all began when at the 1944 Bretton Woods Conference, forty-four countries agreed to the creation of IMF and the World Bank and the creation of a system of exchange rate that pegged the values of all other global currencies to the dollar, which itself was convertible to gold at the rate of $35 per ounce as at then. While the motive then was to provide stability and prevent what was popularly referred to as “beggar-thy-neighbor” currency wars of the 1930s as a result of the Great Depression, when nations abandoned the gold standards and devalued their currencies to gain competitive advantages; today, the outcome and implication on the so-called developing nations has nothing to do with currency stability, but a tool of hegemonic economic control that perpetually subjugates our economic systems to the whims and caprice of the Western economy and totally outside our controls.

For a very long time, the US dollar has, non-stop, usurped the role of Nigerian naira as an imposing authoritative medium of exchange for Forex, market transactions, savings and other elements of financial settlements. It has increasingly and viciously encroached on the performance of the naira, via saturated dollarisation. By extension, it also creates an unfavourable exchange rate volatility that has become the bane of our economic viability and emanates a casualty that would require a very bold policy decision to revert.

By the continued, unfettered dependence on the dollar and engagement in financial settlement acts that undermines the naira; allowing dollar domiciliary accounts within our local banking environment, valuing and quoting our domestic and foreign debts in dollars, quoting and allowing payments for local transactions in dollars, paying certain contractors and government appointees in dollars, we literally set the ground for the abuse of the naira and as the fall guy currency.

If we had been able to effect stringent monetary authority to keep dollarisation index low for the country, create an economy with a strong financial market to offer alternative financial instruments based upon our domestic currency, with a very strong restraint on the flow of dollars and/or any other foreign currency within our system, we would have evolved a strong and sustainable naira overtime. The question now is, is it too late to redeem the naira?

It is a fact and a terrible reality of our economy that the United States currency, the dollar, has not only become an underground legal tender in Nigeria, but has also become the enigma and a nemesis of the naira. By accepting the dollar as the baseline for all our international trades and transactions, we subscribe to the fact that our economy is literally dependent on the economic stability – and otherwise – and decisions of the United States. That the United States can easily take subtle or direct decisions to undermine the strength of our currency and by extension control our capacity to organise our development. A case in point is the 2007-2008 financial meltdown which originated in the US and led to the swift US divestment in the Nigerian financial sector. The outcome partly, if not wholly was the sinking of five Nigerian banks as a result of the external shock.

As expected, we have become limited by the direct influence of the dollar on the naira. Internally, we also face an unacceptable inequality occasioned by the haves and the have-nots of dollars. The country continues to grow the gulf between the rich and the poor based on access to dollars. The complexity of the challenge of the dollarisation of our economy has become so obvious in the last few years; notably when money mongers decided to play on the capacity of the dollar to hurt the naira to their advantage. We saw the value of naira collapsing at an alarming rate, and along with it, galloping inflation. We saw then and now the standard of living of the majority of Nigeria population that constitute the dollar have-nots crumbled, their purchasing power squeezed and weakened, as we welcome a dispensation of unannounced austerity.

Since the emergence of the new Administration of President Bola Ahmed Tinubu, a number of monetary policies have been introduced, all in the bid, to reduce the strong influence of the dollar on naira, revert the falling of naira, and create a stabilised monetary standard for the country. We have seen monetary policy adjustments aimed at addressing speculative activities in the Forex market, increase withdrawal limit of the naira to offset demand pressure on the dollar, among several others, but the reality up till now has been that, all these interventions have only produce temporal succor for the naira and the national economy. We need some stringent policy decisions that are capable of belittling the power of the dollar, the same way it has over the decades hunted and hurt the Naira. Equally, there is a need to seek and offer other alternative root causes of the naira crisis in order to move to better and sustainable solutions.

The immediate past administration of President Muhammadu Buhari had a thought along this line, and commenced the process of limiting the nation’s dependency on the dollar for international trade. Given that a sizable proportion of our trades is with China, settling trades in the China Yuan was established. As at the time I wrote this piece, a unit of Yuan was only #211.80, yet, we would prefer the dollar to remain an intermediate in all our businesses including with China.

However, while the increasing use of Yuan would, to some extent, present a respite for Naira, it would still not be a permanent solution. It is time we think out of the box to present a permanent solution to the ever failing and falling strength of our currency. It is about time we end this currency subordination and free the naira to mobilise itself for stability and present to Nigeria and Nigerians, a stable monetary system, and by extension economic viability. We should learn from Zimbabwe: a developing nation that was forced to the wall by the suffocating dominance of the dollarised effect on the nation’s currency, and the continuous exerted control by the Western nations through the use of monetary control.

Is it not time already to break away from the shackles of monetary imperialism and forge a part towards indigenous and economic freedom and sovereignty? Is it not time already we free our currency from being at the mercy of the dollar and the control whims of the owners of dollars? Is it not time we rescue the naira from all external shocks, inflationary pressure and non ending threats of sanctions? Is it not time we look critically at what is happening in Zimbabwe and commence a new era of currency power for our dear nation? If Zimbabwe can successfully free its currency and empower itself on the basis of its abundant solid minerals, Nigeria can equally unshackle itself.

After suffering dastardly in the hands of Western powers that were altogether bent on frustrating the Zimbabwe for doing the right thing by taking back its lands from colonial occupiers, the post-colonisers kept launching sustained economic terrorism acts against the country, paralysing its currency and drove the nation’s inflation beyond control along monumental poverty; all because the country must have to compete unfavourably with the dollar.

Branching away from dollar dependency, Zimbabwe has turned out a new currency backed by gold and other solid minerals, and for the first time in decades, the battered nation can now boast of a reliable means of exchange and a trustworthy store of value of its currency.

It is about time Nigeria and indeed the entire African nations take a cue from Zimbabwe and abolish the use of the dollar in its current diminishing form. Let our continent flourish as we transact business amongst ourselves and the external global communities with confidence using currencies that are controllably, stable and sustainably on the support of our endowed resources. It is about time we end the imperialistic economic control of our continent and reclaim our economic sovereignty.

While we do this, we must know it is not only an economic issue, but also a moral and patriotic requirement; that we owe it to our nation to set it free from the yokes that ground its economic development capacities.