Why Nigeria must stop treasury bills scam! January 5, 2015 by Henry Boyo Viewpoint illustration In last week’s article, we discussed why inclusive economic growth is made unattainable in Nigeria by the awkward process which the Central Bank of Nigeria adopts for reducing money supply in order to restrain inflation. It is clear that whenever the CBN sells treasury bills to control money supply and prevent spiralling prices of goods and services, it is unwittingly forced, inspite of the attendant oppressive rates of interest, to borrow funds that will simply be kept idle. Ironically, in a manner that is reminiscent of a man who cuts his nose to spite his face, the same CBN is also actually responsible for instigating the inordinately high interest rates attached to government’s huge domestic borrowings! On December 19, 2014, the CBN auctioned government treasury bills and therewith borrowed N195bn from the open market at interest rates which range from nine per cent to 16 per cent for the 90 to 360 days’ debt instruments respectively. Incidentally, barely a week or so after this auction, as an admission of its failure to reduce the naira surplus with existing monetary control measures, the CBN also gave notice that it would borrow another tranche of N1200bn with possibly the same high interest rates also applicable before March 30, 2015. True to its words, last week, the CBN advertised its “Bid Notice” to auction treasury bills and borrow about N160bn on January 8, 2015. Indeed, if the CBN’s strategy for reducing surplus naira is projected along this pattern of borrowing in 2015, we may sadly need to pay over N600bn from our already lean treasury, to primarily the commercial banks, for the joy of borrowing part of the surplus funds which were largely induced by the CBN’s creation and substitution of the naira values for distributable dollar denominated revenue. Clearly, no real development and economic growth can be predicated on such a reckless business strategy. Indeed, failure of this strategy is best amplified by the deepening poverty which has become accentuated nationwide, despite the fortuitous accumulation of bountiful reserves from a bullish crude oil market which persisted for over five years. Thus, we have actually inexplicably become poorer when we were stupendously richer and not even the “embarrassing” availability of eternally systemic surplus naira could redeem our economy! It would therefore be foolhardily to continue to adopt the same arrangements which have distorted our economic fortunes for so long and suddenly expect that our social infrastructure and welfare would rapidly improve, especially when it is also clear that our Small and Medium Enterprises which are, generally regarded as the prime engines of growth and job creation, are incapacitated by the socially antagonistic strategy that ensures that the SMES forever remain in a lopsided competition with the CBN and the Debt Management Office for the available “surplus” funds in the market. The question then, is why does the CBN and the government persist in this macabre emasculation of our economy? It is difficult to suggest that our economic management team is ignorant of the cause of the clear failure of its policies to instigate the kind of economic growth that creates increasing jobs! Surely, the evidence of failure of this strategy is also clearly mirrored in the rising rate of unemployment and our stubbornly famished industrial landscape, in which consumer demand is retrogressively, stringently, capped by an average inflation rate of about eight per cent in recent years. Sadly, the way things are, we may never witness below three per cent best practice inflation and monetary policy rates that are characteristic of economies where genuine economic growth and vastly enhanced social welfare exist. Regrettably, however, our government has consistently, and inexplicably too, sustained an obtuse liquidity management strategy that will ultimately propel our economy into a tail spin with considerable adverse consequences for everyone. Furthermore, the National Assembly appears to have readily acquiesced to this annual rape of our economy with the CBN’s treasury bills borrowings, which not only makes it difficult and expensive for the SMES to access funds, but also immorally and inequitably subsidises bank profits with over N600bn interest payments on borrowed funds that will inexplicably be quarantined as idle deposits by the apex bank. Regrettably, the farcical complexion of this strategy is that the trillions of naira surplus funds borrowed and quarantined annually by the CBN actually exist simultaneously with the need for additional medium and long term loans at equally oppressive interest rates to fund annual budget deficits! Inexplicably, the government and the National Assembly appear determined to sustain this oppressive process which continuously throws up a handful of very rich Nigerians while, increasingly, more than 80 per cent of our fellow countrymen still live on the proverbial poverty benchmark of U$D2/day. Fortunately, we are in a democracy, and it is also the season of political campaigns leading to the eventual elections in February. Consequently, the parties that seek our votes must be asked to state their position on the CBN’s “Treasury bills scam” in very clear terms, i.e., whether or not they would stand on the side of the people by quickly stopping the blatant rape of our patrimony with the CBN’s failed attempts to reduce excess naira supply by unwittingly borrowing trillions of naira that will simply be kept idle at a time the real sector remains starved of funds! No candidate or political party can be trusted with the management of public funds if they knowingly condone the enrichment of a small minority of Nigerians with payment of over N600bn interest charges on government debts, which are not applied to redressing the condition of over 160 million Nigerians who still wallow in poverty. Unfortunately, we are all helpless victims of this brazen scam and, so long as any government sustains such an inequitable and oppressive strategy for managing money supply, there is clearly no possibility that Nigerians will ever be redeemed from economic bondage. Fortunately, politicians and critics cannot suggest that the required public declaration of their opposition to the treasury bills scam has any ethnic, religious, political or cabalistic colorations. The simple question, therefore, is whether your political party will stop or sustain this apparent betrayal of the trust of Nigerians on this matter of managing public funds wisely. Consequently, Nigerians should raise their voices in support of any campaign to stop the CBN’s economic malady which is clearly the root of our economic woes. Everyone can let their voice be heard on this campaign by simply tweeting their name and telephone number with the slogan “I support the NSTBS campaign” to the twitter handle @Lesleba #NIGERIA STOP TREASURY BILLS SCAM (N:STBS)!! Similarly, the same message can be sent as text messages on mobile phones to 08052201997. Please, be assured that if the size of participants is sufficiently impressive, a compiled summary of respondents will be made available to frontline political parties as a guide to the kind of change Nigerians urgently want. Our future and the future of Nigerians yet unborn is at stake; this is no time to sit on the fence especially in the face of clear evidence that for decades the CBN and our Economic Management Team have succeeded in selling the Nigerian people a dummy on the effectiveness of their convoluted monetary strategies.
Posted on: Mon, 05 Jan 2015 18:04:15 +0000
Trending Topics
Recently Viewed Topics
© 2015