The Nigerian economy adopted the liberalised currency using the Wholesale Dutch Auction System, W.D.A.S., on 29 September 1986. The first currency auction of successful bidders on that day was $1 to N3.00 from $0.68 to N1.00. Nigeria came about this after a national debate on whether to adopt the I.M.F. recommended fiat devaluation of $1 to N2.00, or the W.D.A.S. weekly bidding. On the day of that first bidding all assets, quoted in Naira, lost their value immediately from that day. These were all the foreign investments in the country, mostly long-term investments like the auto industry. Also, people’s savings in the bank and the Naira in the people’s pockets were equally impacted. All these assets were now worth a third of their dollar value that was a day before 29 September 1986. It was not a fiat devaluation as recommended by the I.M.F. Economic advisers like Olu Falae, Kalu Idika Kalu, etc., were IBB’s advisers. These were the disciples of neoliberalism. They convinced IBB that the national treasury could be funded better if the country adopted the bidding methods that use the market forces to determine the value of the Naira.

In 1982, at the early stage of the prolonged global recession that would last till the mid-1990s, the I.M.F. had warned that Nigeria urgently needed a Tax Reform. The government was becoming insolvent because of reduced oil earnings, and nobody was paying tax or at best under-assessed, except those on P.A.Y.E. platform. The government was struggling to meet its wage bills. The delay in recovery in most of the O.E.C.D.’s economies crashed the prices of commodities like cocoa. The reform of the tax system was called for by I.M.F., but that would take time. So I.M.F. accepted two years for Nigeria to put its house in order and reform its tax system. So the Structural Adjustment Programme was instituted in the interim to last just two years. But until this day the reform of the tax system that is so crucial has been on the shelf. It had not been revisited, and only 10 million people are on the tax database in Nigeria currently in the whole of Nigeria. In a population of nearly 200 million, the Nigerian economy is not going anywhere, oil revenues notwithstanding. Of this sorry tax-paying numbers, Lagos State accounts for 4.6 million. Even at that, only about 400,000 people paid tax in Lagos State in 2019.

Back to 1986: because the bidding system was formulated to sell to the highest bidder, those in the productive sector were continuously outbid by those in the mercantile sector which naturally had a faster return on investment. The productive sectors like agriculture needed to wait for harvest time to get returns on investment. In that time, the mercantile sector would have turned around their finances many times over. The advantage the mercantile sector had, of a quicker turnaround of investments, allowed that sector to always succeed in outbidding the productive sectors. The educational sector of the economy was not left untouched, and that too suffered the same fate. For instance, it took 7 years to train a doctor for any returns on investment, etc. Also affected was the manufacturing sector, that continues to bear the scar until this day.


For the first time in living memory, frequent agitation for salary increases became the order of the day. By 1992, the Naira was now as low as $1 to N22.00. The country soon realised another phenomenon. Public capital projects were being abandoned in numbers because the bill of quantities was realistically on dollar value since 90% of the components were to be imported. The cost at the country of manufacture of these materials was still the same in dollar value. Unless there were contract variations to adjust the dollar equivalent in Naira, hundreds of contracts were abandoned. The devastation was so bad as it affected human capital capacity. Nigeria’s professionals, our best brains, started the exodus to foreign countries that could pay what they were worth. Education lost its funding, starved of forex components, after being continuously outbid by the mercantile sector.

Manufacturers too realised it was better to import the same things they were producing and have faster returns. Those that did were able to maintain a black balancing on their financial books. Why keep a workforce to manufacture with all the social liabilities, when one could lay the workers off; move the pieces of machinery to one side? All that the business owners needed are a storekeeper, a cashier and security personnel. That set the stage for the massive unemployment we are witnessing today. Nigerian youths are still roaming the streets looking for what to do, but this time it is a ticking bomb.

Manufacturers did not even need electricity, maybe for air conditioners (cooling the workplaces). They could have a transparent roof for light in the warehouses during the day for all they cared. The closing down of factories started affecting the power sector also as industrial power demand plummeted. Before long, the power sector was no longer making enough to break even and could not replace transformers and other power pieces of equipment.

Because factories were no longer needed, and at the same time, the coming of the evangelical movement, something fundamental happened. The P.A.Y.E. tax platform was hit as many taxpayers were retrenched. The hardships with loss of jobs drove many to seek hope, and the pastors promised prosperity but for a fee. What the government lost in tax, the religious organisations gained as tithes. But the religious organisations are exempted from taxation, themselves. Well now, nobody was giving to Caesar what is due to Caesar any longer. The churches and mosques waited for the government to fix the road in front of their church or mosque. Christ’s advice to “Give unto Caesar what is due to Caesar”, is never part of the sermons only complaints that Caesar was not doing enough. After all, what does Caesar do with the oil money? But in reality, a big chunk of the oil money comes in as tithes.

The churches and mosque without social responsibilities to build and maintain infrastructures didn’t care if their congregations did not pay tax as long as they pay tithes. The churches started making stupendous untaxed money through tithes. They were now in a position to buy over the former factory buildings. Instead of producing goods for prosperity, we shifted towards producing souls. Society morality got worse as the economy remained suppressed. The worst damage would be capital flight as that would take its own toll on the economy. It basically deprived the Nigerian government of taxing such assets. It accelerated the devaluation of the Naira as wealth was illegally exported. The Naira started chasing less and less wealth. Nigerians obviously had lost confidence in the Naira as a STORE CURRENCY, and the world took notice. Long-term foreign investors then realised they too needed to disinvest from the Nigerian economy if Nigerians themselves were moving their savings and assets abroad. The long-term investors got shocked when the government announced the removal of all restrictions to the importation of finished goods. These were some of what was promised that attracted them to Nigeria. The competition with imports of used goods forced many foreign investors to cut their losses and run as they had lost the exclusivity of the market. Two things generally bother foreign investors – security of invested funds and returns on investment. Because of the liberalisation of the Naira, the long-term foreign investors lost the protection to their invested funds. The auto assembly plants were particularly hit. Also, the flinging open of the Nigerian market to imported finished products impacted negatively on their returns on investment. So they quickly left.

The long-term foreign investors were, however, quickly replaced by international portfolio investors. These are basically the financial hawks who came into the Nigerian economy to trade by betting on the currency. Currency futures became the norm as they bet on further devaluation. Today, the Naira futures, we are being told, is around N570 to $1 U.S. dollar, which the speculators have deposited to CBN. It means the government will need to continue to intervene to keep the dollar at the official rate of N380 to $1.00, which of course is what the speculators cream off our economy. Otherwise, there will be a run on the Naira plunging further. No matter how hard Nigerians worked, these speculators will always cream off the gains of the people’s sweats.

The economy remained distressed and was now dependent entirely on the fortunes of oil. The government waits for oil receipts from the multinationals involved in the exploitation of oil and gas. The petrodollars are then auctioned at the Central Bank (CBN) to, majorly, the importers. Without guidance on what is crucial to further create wealth, the importers imported whatever the general public fancied. At this point, the managers of the economy had lost control of the economy. The government could no longer use the Pareto principle for resource allocation to effect equilibrium in the marketplace. Periodically, the government without revenue accruing from taxation needed to prompt further devaluation to meet its wage bills. Why only wages and not capital projects? Because, ideally, depreciation of the currency, Nigeria’s style, does not affect contracts. Contractors always asked for variations to the dollar components; otherwise, they would abandon the capital project. Before long, the whole Nigerian landscape was littered with abandoned projects solely as a result of the Naira continually losing value.

Armed with Naira at the exchange of petrodollars, the government goes on a Naira spending spree. It pays the worker their wages in Naira, funds the overheads in Naira and awards capital projects contracts in Naira. All those paid by the government go to the market where the importers are waiting to buy their needs. Because nobody pays tax or adequate taxes, the government will have to wait for the next tranche of petrodollars payment by the oil multinationals. The importers now after accruing Naira from selling imported goods approach the government yet again for forex exchange to replenish their stocks. Some will not even bother to bring anything back – capital flight. If you notice, little has been done to create further wealth.

In no time, the people became poorer each time the Naira lost its value through the combination of capital flight and currency trading, mainly. A typical example was in May 2016 when the Naira lost its value from $1-N197 to $1-N315, over 30 million Nigerians plunged into the poverty bracket (below the poverty line) suddenly on that day. Nigeria thus became the poverty capital of the world by definition with just that action of devaluation. There is a conspiracy theory to that momentous day. It was the day, 7 May 2016, President Buhari, who had told the nation he never favoured medical tourism, embarked on long health tourism. He had lost the argument in the executive council, from all indications, to not devalue the currency. Before that day, Nigeria was rated to have 45 million people living below the poverty line. Still, it grew overnight to 75 million with the May 2016 devaluation. When he returned, he asked, “What’s the gain of devaluation?” Nobody has been able to give a satisfactory answer because there is none.

The simple analysis below will explain how devaluation affects poverty rating. If I earn N400 daily at the exchange rate of $1 to N360, I am classified as living above the poverty line. Should the government, overnight, devalue the currency, I would have fallen below the poverty line. How? With the same work and productivity and still earning only N400 daily wage at the new exchange rate of $1 to N420, I am now classified as living below the poverty line. Now you can see how devaluation impoverishes the people even though they are working their asses out.

Nothing can justify pushing millions of people below the poverty line just because the government is too lazy to go after tax dodgers. The proponents only understand devaluation discourages appetite for foreign-made goods. That only applies if there is no alternative to increasing production. In the case of Nigeria, there will always be an alternative as long as there is free oil money. Unlike the Saudis’ A.R.A.M.C.O., that produces the Saudi oil by itself, Nigeria’s N.N.P.C. is only to collect Nigeria’s share of the Nigerian oil receipts from the oil multinationals that do the production. That’s money outside of productive effort which is the alternative to work harder to produce to beat the effects of devaluation.

It is wicked for a country to devalue its currency just to meet the government’s wage bill of public servants. They are only a percentage of society. For Nigeria to move forward post-COVID-19 pandemic, it must stop outright the trading on its currency. The most straightforward is to tie the Naira, once again, to the dollar. That way, it becomes technically impossible to trade the Naira against the base currency, which is the dollar. Removing such variable from the economic management will allow Nigeria to focus. The government should run on tax revenue, to spur producing further wealth on our factory floors and under our vast arable land that is overgrown with bushes. Nature’s engineering is almost free as it works; its wonders under the soil create wealth for a nation.

Nigerians, who are the custodians of an estimated $600 billion assets illegally taken outside the Nigerian financial system, may have a rethink. I can only say put your money where your mouth is. COVID-19 has taught the whole world the importance of looking after your own. Social predators are pack hunters make easy prey of individuals, no matter how rich, but not of the same species as them. Most of our fortunate citizens with assets taken from Nigeria into foreign lands became persona non grata in countries they have invested heavily during the various lockdowns. Even those with dual citizenship found out they are voiceless or have limited voice, where their money is. The worst, they are finding out, is to be wealthy and gagged. But in our midst, they have the licence to be as loudest as they can. This is where your mouth is, as you can see. The world does not rate an individual, no matter how successful, higher than the ordinary people where the individual comes from. Investing in your country is not doing a favour, it also earns you respect in the eyes of the world. When a Nigerian presents the Nigerian passport at a foreign border post, they don’t see the Dangote in us, they see how poor the ordinary Nigerian back home is.

What is the cost of the liberalisation of the Naira? Well from the last count, the CBN had to spend over $60 billion over the previous five years to stave off attacks on the local currency, the Naira, by the currency speculators. The CBN interventions are technically bribing speculators to keep the official rate of the Naira manageable at their official price. If it is that expensive, what is the point? The $60 billion that could have helped to lower the cost of living for the people through improved infrastructures are given out to currency speculators. We can do better than that in a fixed exchange rate regime and a robust tax system.

Samuel A. Caulcrick

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