Naira Resurgence, Foreign Reserves and the Illusion of Truth, by Abdulrahman Abdulraheem
Famous psychologist, Tom Stafford, believes repetition makes a claim seem more true, regardless of whether it is or not. Understanding this effect can help one avoid falling for propaganda.
“Repeat a lie often enough and it becomes the truth,” is a law of propaganda often attributed to the Nazi politician, Joseph Goebbels. Among psychologists something like this known as the “illusion of truth” effect.
It was this sort of ancient propaganda tactics that people who do not mean well for the country resorted to when they claimed that the recent recovery of the Naira against the Dollar was because the federal government of Nigeria emptied the foreign reserves to defend the national currency. Since a lie that has been repeatedly told manages to gain traction and remains in the consciousness of people and sometimes makes them assume it is true, the propagandists and their agents have kept at it for weeks now and they have hammered on it consistently in their desperation to convince themselves that they know what they are saying.
No matter how long falsehood travels, truth will always catch up with it. The truth remains that the resurgence of the Naira is not a fluke. It is due to the numerous policies and actions introduced by the Central Bank of Nigeria (CBN) to regulate and sanitise the foreign exchange market.
The Naira did not bounce back because the government emptied the foreign reserves to defend the Naira. The Naira is still being floated.
If not for a combination of mischief and ignorance, why would anyone believe that the foreign reserves were tempered with to shore up the value of the Naira? Of course we are all aware of the huge inherited bills that the CBN had to settle concerning foreign airlines and companies that were supposed to repatriate their profits in Dollars. These were bills that were left unsettled due to the sheer incompetence of the recent past.
For the umpteenth time, the CBN Governor, Mr. Olayemi Cardoso, had to place it on record that the apex bank is not defending the Naira with the nation’s foreign reserves. It was quite awkward watching Cardoso on TV while he laboured to explain what should be a straightforward knowledge to every educated adult. But with the overdose of mischief in the system, he had to make the clarifications for the records.
He was speaking against the backdrop of the recent decline in the foreign reserves corresponding with massive appreciation of the Naira in the foreign exchange market which fueled speculations that the apex bank pumped forex into the market to dwarf demand pressure and shore up the value of the local currency.
Speaking at the Spring Meetings of the IMF and the World Bank in Washington recently, Cardoso said that his team at the apex bank is determined to nurse a foreign exchange market ruled by the principle of willing buyer-willing seller.
“Defending the Naira, from every indication is an elephant in some rooms. I will make this as clear as possible. It is not our intention to defend the Naira. Much as I have read some opinions recently about what has happened in terms of our reserves being drawn down, the CBN defending the Naira and all that. If you take your mind to our philosophy and policy, you will see that it will be counter intuitive. We want the Naira to perform independently as long as we have a vibrant forex market.
“We are not defending the Naira. We do not intend to defend the Naira, our policy is clear. It is all about a free market, with little or no intervention from the CBN. Our policy remains willing buyer, willing seller. The depletion you noticed in our foreign reserves is due to debt obligations inherited, and we just have to settle these debt obligations. It is part of our responsibilities. Such depletion is what you would observe with any foreign reserves anywhere in the world. The foreign reserves will drop and it will increase as we get more inflows. We just received a 600 million dollar inflow. We don’t need to defend the Naira, it’s not in our intention to do so.
“Initially we needed to keep the BDCs going. So, it is important for people to get forex for school fees, travels and the like.
“The shift you see in our reserve is not to defend the Naira but for things like settling obligations that fell due. Mind you, that is the reason for keeping foreign reserves in the first place,” he said.
The CBN boss said he decided to go the orthodox central banking route in order to build confidence in the Nigerian currency.
The governor expressed satisfaction that he took hard decisions but added that they are yielding desired outcomes.
He recalled that within two months of his administration, the Naira was adjudged the worst performing currency, but within six months it moved to the best performing currency, globally.
Last Line
Everyone who has eyes to see and ear to hear can bear witness that Cardoso’s orthodox banking style is leading the economy along the right trajectory.
Reckless issuing of Ways and Means has become a thing of the past, no more printing of currency without corresponding production, no more giving of dollars to friends that encourage round tripping and jerk up the price of the Dollar against the Naira. Naira is regaining its strength and has just recently been awarded the best performing currency in the world. Inflation is also being addressed and it is only a matter of time before all the parameters fall into place and price of goods and services begins to fall.
No matter what government does, some persons have made up their minds never to acknowledge or compliment. That is why they will always look for lies to weave around the great things Cardoso is doing at the CBN. As they continue to reel in pain because the disaster they predicted and wish for Nigeria is not happening, we will continue to mock their unpatriotic tears and celebrate the gain Naira is recording.
Abdulrahman Abdulraheem is the author of “eNaira Revolution: A Peep into Nigeria’s Cashless Future”
