Former Finance Minister, Dr Idika Kalu Reacts To Incessant Decline In Naira Value

As Naira nosedives into a tail-spin, performing woefully against other currencies of the world, especially US dollars and British pound, there has been outpouring reactions from well meaning Nigerians who believe proactive steps need to be taken in order to stem the ugly tide.

Latest in the fray of reactions is renowned economist and former Nigeria's minister of Finance, Dr Kalu Idika Kalu.

Dr. Kalu, a very reticent elder-statesman holds a doctorate degree in Economic Development and Public Finance (UW–Madison) and is a Yale Stimson Fellow. Over the past 4 decades, Dr. Kalu’s work in the field of economic policy and development planning has spanned many regions in East Asia and Africa.

He has participated extensively in research work on developing countries, has lectured at the University level, and while at the World Bank’s East Asia and Pacific Programmes Department, contributed significantly to micro and macro-economic work on the economies of Japan, Korea, Taiwan, and Hong Kong.

With no intent to malign anyone, especially the government of the day, he posted on his facebook timeline very punchy article which may serve as a guide to Nigeria's current economic team.

The septuagenarian said when Managing director of the International Monetary Fund (IMF) Ms Christine Lagarde paid a four day visit to Nigeria early in President Buhari's administration, it was plausible that Nigeria, through negotiations with Fund, could cover up to 80% to 85% of the projected revenue impact from the over 70% decline in the oil price.

He stated further in his opinion that with additional resources from such other institutions as the World Bank and the AfDB, as complement to Nigeria's own resources, the country should have managed to keep the equilibrium between the demand and the supply of foreign exchange in 2016. He believes such initiative will not only have prevented the precipitous drop in the Naira exchange rate, but could even have strengthened the Naira by improving our reserves level as oil prices improved moderately, and as recoveries from looted funds, gains from the single treasury account and other fiscal changes took effect.

Here is the full text culled from his facebook timeline which was published on Saturday night, August, 7, 2016:

''There was a recent comment in a Nigerian internet forum on the further depreciation of the Naira to 400 to the Dollar and 510 to the Pound and the prospect of even further declines.

''It is rather distressing that we have opted to repeat the mistakes of thirty years ago. When Largarde visited very early in this administration, it was plausible that Nigeria, through negotiations with Fund, could cover up to 80% to 85% of the projected revenue impact from the over 70% decline in the oil price. With additional resources from such other institutions as the World Bank and the ADB, as complement to Nigeria's own resources, we should have managed to keep the equilibrium between the demand and the supply of foreign exchange in 2016.

''This will not only have prevented the precipitous drop in the Naira exchange rate, but could even have strengthened the Naira by improving our reserves level as oil prices improved moderately, and as recoveries from looted funds, gains from the single treasury account and other fiscal changes took effect.

''By adopting the policies we've been following, we have unduly constrained the availability of foreign exchange, put pressure on domestic prices as inflation has increased, and have limited the capacity of the real sectors to produce and create jobs. Further more, the cost of capital , the rate of interest has gone up, limiting both the volume and increasing the cost of credit to all productive sectors!!!!

''What needs to be noted is that as long as these policies are not changed, there is no guaranteeing any finite level of depreciation of the Naira value with respect to any of our trading currencies.

We should realise that it is for the purpose of addressing these unexpected deep and sharp decline in export commodity prices that these facilities were set up in the first place. This is the primary substance of the discussion that Largarde expected to have with the new administration. Rather, we were "happy" to observe that she said she did not come to give Nigeria any loan.

''This is the same position we were thirty years ago!!!! As a result, instead of the Naira improving in its relative value from the onset of this administration, we have watched, seemingly helplessly, using trial and error fiscal and monetary policies, mostly draconian and flagrantly against the run of market conditions, resulting in the drop from about 197 to now 400 in the value of the Naira in relation to the Dollar. Even with the continuing uncertainty, it appears that government is not disposed to considering alternative policies.

''The sheer volume of such capital assistance is indicative of the normal use of such funds by many countries both developing and developed. The IMF alone disburses about 25 billion Dollars annually. These funds are designed to bridge the resource gap such as the one the Nigerian economy is currently facing. These funds are invariably very concessionary in their terms e.g. low interest, adequate grace period, and long term repayment.

''As a consequence of such low conditions, such funds are in fact usually rationed among member countries. It is not true that the financial institutions " push" such loans. The real issue is that they are provided under the condition or the so called conditionalities that the recipient member country will dutifully implement the remedial policies that would correct the domestic imbalances that created the need for such request for assistance in the first place.

The need for CHANGE is self evident!!!!!!''

According to information provided on the portal of institute for policy and economic development, ( www.theiped.org ), Dr. Kalu’s work at the World Bank during the 1970’s coincided with the restructuring period of the “Asian Tigers”. He conducted detailed studies on the industrial structure and tariff protection of Korean export industries. With his colleagues at the World Bank, Dr. Kalu’s work was instrumental in shaping the policies of Korea that helped its economy move from labor intensive manufacturing to the thriving capital goods and technology intensive economy that exists today.In the Private sector, Dr. Kalu joined Skoup & Company Limited as head of the economics division. During his tenure, he directed major studies covering both industrial and agricultural sectors including oil, LNG, steel, petro chemicals, and agricultural infrastructure and credit.

In the public sector, Dr. Kalu has held many ministerial positions in Nigeria including Commissioner of Finance and Economic Planning in IMO State, Nigeria; the Federal Minister of Finance under two regimes; the Federal Minister of National Planning; and the Federal Minister of Transport.

Over this period, Dr. Kalu served as Chairman, ECOWAS Council of Ministers; as Chairman, African Development Bank; Chairman, Council of Economic Advisors, Centre for Advanced Social Studies (CASS, Port Harcourt, Nigeria); and as member of the Development Committee at the World Bank. Dr. Kalu played a leading role in the formulation of Nigeria’s economic reform policies. He helped to lay the basic foundation for Nigeria’s policies of economic liberalization, globalization, and privatization. He represented Nigeria at various world conferences as well.

Though currently back in the private sector, Dr. Kalu frequently engages in the formulation of policy at both the state and federal levels in Nigeria. He was designated Nigeria’s Candidate for the Deputy Director General position at the World Trade Organization (WTO) in 1999, and later appointed as Ambassador Extraordinary and Plenipotentiary to the European Union (EU) in 2000. Also to his credit he was appointed to serve on a special Niger Delta Technical Committee to advise on a final resolution of the Niger Delta crisis in Nigeria.

Dr. Kalu currently serves on the board of several organizations both within and outside of Nigeria. Most notably, he has been the chairman of BGL, PLC; an investment bank that is a major player in the stock market and well known in public sector advisory and private sector consultancy. Dr. Kalu’s work and contributions are regularly referenced in current publications, magazines, and newspapers. As a former presidential candidate (2003), Dr. Kalu continues to be proactive in the Nigerian political arena.