In 2017 and 2018, the Open Market Operation cost of maintaining Nigeria’s artificial N360/US$1 exchange rate and the above US$40 billion encumbered foreign reserve was US$10.008 billion, N2.114tn (US$5.872 billion) in 2017 and N1.489 trillion (US$4.136 billion) in 2018. In a layman’s language, this is how much interest we paid the foreigners who own part of the dollars we used to show off that our foreign reserves have increased.
To put this cost in perspective, the N2.114 trillion spent in 2018 is more than the federal government’s 2018 fiscal year crude oil revenue of N2.08 trillion. The N1.489 trillion spent in 2017 was more than the FGN’s fiscal year crude oil revenue of N1.413 trillion. These foreign portfolio investors must be laughing their heads off. For them, this must be MMM + Loom returns with Zero Risk.
This is why in the second part of the leaked CBN audio, the apex bank governor, Godwin Emefiele, is heard groaning in exasperation, “opposition will say they should have depreciated and they didn’t depreciate!”
So, to my friends who still hold their grounds, with this cost in the public domain, do you still argue that we shouldn’t have allowed a depreciation of the naira through a managed free float? What do you think the current exchange rate will be if we adjust for this cost alone?
Jekwu Ozoemene, Port Harcourt, Rivers state
