PRESIDENT Muhammadu Buhari, confirmed the decision of Central Bank of Nigeria (CBN) to introduce floating exchange rate regime in place of the current fixed rate policy.
In his national broadcast to mark his one-year anniversary in office, Buhari said “in respect of the economy, I will like to directly address you on the very painful but inevitable decisions we had to make in the last few weeks, specifically on the pump price of fuel and the more flexible exchange rate policy announced by the CBN.
“It is even more painful for me that a major producer of crude oil with four refineries that once exported refined products is today importing all of its domestic needs. This is what corruption and mismanagement had done to us and that is why we must fight these ills.
“As part of the foundation of the new economy, we have had to reform how fuel prices had traditionally been fixed. This step was taken only after protracted consideration of its pros and cons. After comprehensive investigation, my advisers and I concluded that the mechanism was unsustainable.”
A floating exchange rate or fluctuating exchange rate is a type of exchange rate regime in which a currency’s value is allowed to fluctuate in response to foreign exchange market mechanisms and such a currency is known as floating currency.
Historically, naira has been fixed with its value tied to a basket of international convertible currencies like dollar, pound sterling and others.
Following the collapse of crude oil prices in 2014, foreign reserves fell from over $40 billion in August of that year to around $27 billion presently.
Introducing floating exchange rate regime is an indirect way of devaluing the naira, which the president earlier vowed never to allow as the CBN is unable to meet foreign exchange demand at the fixed rate of N199 per dollar.
Practically, therefore, CBN will no longer have a fixed rate for the naira, as the market will now determine the exchange rate at any point in time.
The president had earlier said in the speech that “we resolved to keep the naira steady as in the past, devaluation had done dreadful harm to the Nigerian economy. Furthermore, I support the monetary authority’s decision to ensure alignment between monetary policy and fiscal policy.
“We shall keep a close look on how the recent measures affect the naira and the economy, but we cannot get away from the fact that a strong currency is predicated on a strong economy. And a strong economy presupposes an industrial productive base and a steady export market.”
My biggest challenge
President Buhari also spoke of the major difficulty facing his one-year-old administration, saying it was “reconstructing the spine of the state.”
Buhari said in his nationwide broadcast, that the last 12 months were devoted to ensuring that the pillars of the state and democracy could take root.
According to him, “but the real challenge for this government had been reconstructing the spine of the Nigerian state.
“The last 12 months had been spent collaborating with all arms of government to revive our institutions, so that they are more efficient and fit for purpose:
“That means a bureaucracy better able to develop and deliver policy.
“That means an independent judiciary above suspicion and able to defend citizen’s rights and dispense justice equittably.
“That means a legislature that actually legislates effectively and above all, that means political parties and politicians committed to serving the Nigerian people rather than themselves.
“These are the pillars of the state on which democracy can take root and thrive, but only if they are strong and incorruptible.
“Accordingly, we are working very hard to introduce some vital structural reforms in the way we conduct government business and lay a solid foundation on which we can build enduring change.”
The president said in order to move forward, the country must shun extravagance and his administration was leading the way through the implementation of the Treasury Single Account (TSA).
He said: “An important first step has been to get our house-keeping right. So, we have reduced the extravagant spending of the past. We started boldly with the TSA, stopping the leakages in public expenditure.
“We then identified 43,000 ghost workers through the Integrated Payroll and Personnel Information system. That represents pay packets totalling N4.2 billion stolen every month. In addition, we will save N23 billion per annum from official travelling and sitting allowances alone.
“Furthermore, the efficiency unit will cut costs and eliminate duplications in ministries and departments. Every little saving helps. The reduction in the number of ministries and work on restructuring and rationalisation of the MDAs is well underway. When this work is complete we will have a leaner, more efficient public service that is fit for the purpose of changing nigeria for the good and for good.
“As well as making savings, we have changed the way public money is spent. In all my years as a public servant, I had never come across the practice of padding budgets.
“I am glad to tell you now we not only have a budget, but more importantly, we have a budget process that is more transparent, more inclusive and more closely tied to our development priorities than in the recent past. 30 per cent of the expenditure in this budget is devoted to capital items.
“Furthermore, we are projecting non-oil revenues to surpass proceeds from oil. Some critics have described the budget exercise as clumsy. Perhaps, but it was an example of consensus building, which is integral to democratic government. In the end, we resolved our differences.”
Buhari was delighted at his government’s achievements in office so far, reiterating that democracy was the best form of government.
According to him, “it is one year since our administration came into office. It had been a year of triumph, consolidation, pains and achievements. By age, instinct and experience, my preference is to look forward, to prepare for the challenges that lie ahead and rededicate the administration to the task of fixing Nigeria.
“But I believe we can also learn from the obstacles we have overcome and the progress we made thus far, to help strengthen the plans that we have in place to put Nigeria back on the path of progress.
“We affirm our belief in democracy as the form of government that best assures the active participation and actual benefit of the people.
“Despite the many years of hardship and disappointment, the people of this nation have proven inherently good, industrious tolerant, patient and generous.”
Noting the deterioration in the economic and security conditions in the past years, he recalled that he campaigned and won election on the platform of restoring security, tackling corruption and restructuring the economy.
He observed: “On our arrival, the oil price had collapsed to as low as $30 per barrel and we found nothing had been kept for the rainy day. Oil prices have been declining since 2014, but due to the neglect of the past, the country was not equipped to halt the economy from declining.
“The infrastructure, notably rail, power, roads were in a decrepit state. All the four refineries were in a state of disrepair, the pipelines and depots neglected.
“Huge debts owed to contractors and suppliers had accumulated. Twenty-seven states could not pay salaries for months. In the North-East, Boko Haram had captured 14 local governments, driven the local authorities out, and hoisted their flags. Elsewhere, insecurity was palpable; corruption and impunity were the order of the day. In short, we inherited a state near collapse.
“On the economic front, all oil dependent countries, Nigeria included, have been struggling since the drop in prices. Many oil-rich states have had to take tough decisions similar to what we are doing.
“The world, Nigeria included, had been dealing with the effects of three significant and simultaneous global shocks starting in 2014.
“A 70 per cent drop in oil prices; global growth slowdown and normalisation of monetary policy by the United States federal reserve.
“From day one, we purposely set out to correct our condition, to change Nigeria. We reinforced and galvanised our armed forces with new leadership and resources.
“We marshaled our neighbours in a joint task force to tackle and defeat Boko Haram. By the end of December 2015, all but pockets and remnants had been routed by our gallant armed forces.
“Our immediate focus is for a gradual and safe return of internally displaced persons in safety and dignity and for the resumption of normalcy in the lives of people living in these areas.
“EFCC was given the freedom to pursue corrupt officials and the judiciary was alerted on what Nigerians expect of them in the fight against corruption. On the economy, in particular foreign exchange and fuel shortages, our plan is to save foreign exchange by fast tracking repair of the refineries and producing most of our fuel requirements at home.
“And by growing more food in Nigeria, mainly rice, wheat and sugar, we will save billions of dollars in foreign exchange and drastically reduce our food import bill.
“We resolved to keep the Naira steady, as in the past, devaluation had done dreadful harm to the Nigerian economy. Furthermore, I supported the monetary authority’s decision to ensure alignment between monetary policy and fiscal policy.
“We shall keep a close look on how the recent measures affect the Naira and the economy, but we cannot get away from the fact that a strong currency is predicated on a strong economy. And a strong economy presupposes an industrial productive base and a steady export market.
“The measures we must take may lead to hardships. The problems Nigerians have faced over the last year have been many and varied.”
The president further assured that policy measures and actions taken so far were not to be seen as some experiment in governance, expressing fears that vested interests would resist them.
He added: “We are fully aware that those vested interests, who have held Nigeria back for so long will not give up without a fight. They will sow divisions, sponsor vile press criticisms at home and abroad, incite the public in an effort to create chaos rather than relinquish the vice-like grip they have held on Nigeria.
“The economic misfortune we are experiencing in the shape of very low oil prices has provided us with an opportunity to restructure our economy and diversify.
“We are in the process of promoting agriculture, livestocks, exploiting our solid mineral resources and expanding our industrial and manufacturing base.
That way, we will import less and make the social investments necessary to allow us to produce a large and skilled workforce.”
…Offers ‘carrot, stick’ to end Niger Delta militancy
President Buhari opened a window of negotiations with Niger Delta militants, who have renewed their campaign to sabotage oil and gas installations in the region, but has warned that any attempt to test the government’s resolve would be severely dealt with.
In his broadcast, he said the sabotage of infrastructure would not stop the government from parleying with the elders of the region towards a sustainable resolution to the crisis.
However, he added that government would arrest those responsible for the acts and bring them to justice.
He also stressed his government’s commitment to re-engineering the Niger Delta Amnesty Programme and implementing the United Nations Environment Programme report to clean up the pollution in the Niger Delta.
He said: “The recent spate of attacks by militants disrupting oil and power installations will not distract us from engaging leaders in the region in addressing Niger Delta problems.
“If the militants and vandals are testing our resolve, they are much mistaking. We shall apprehend the perpetrators and their sponsors and bring them to justice.”
The president added: “We are committed to implementing the United Nations Environment Programme report and are advancing clean-up operations. I believe the way forward is to take a sustainable approach to address the issues that affect the Delta communities. Re-engineering the amnesty programmes is an example of this.”
While he noted the progress in the ongoing effort to recover stolen funds, President Buhari, however, failed to disclose how much had been recovered so far, saying the Ministry of Information would publish the amount, which he said would be paid into the nation’s treasury when forfeiture formalities were concluded.
He spoke on the current economic hardship in the country, particularly the hike in petrol price, explaining that government needed to take tough decisions, which he said had yielded significant results in the areas of security, tackling corruption and on the economy