Mr. Brain, a Financial Expert, has charged the Central Bank of Nigeria (CBN), to look towards the de-dollarization of Nigeria’s Economy.
He stated this in an exclusive interview with our correspondent while reacting to the $2.9 billion deposit created by the Central Bank of Nigeria (CBN) to stabilize the foreign exchange (forex) market.
The apex bank, which identified the special account as the Gazelle Funding Account, dropped the hint during the last Federation Account Allocation Committee (FAAC) meeting.
Reacting, McBrain and Company Boss, noted that Nigeria should seek local solutions to its Forex challenges by taking a cue from the BRICS.
“I may want to propose the de-dollarization of our economy. Other countries are doing it, what is wrong with Nigeria exploring this window? Why are we leaning on dollars? We need to start looking at the de-dollarisation of our economy.
“Fortunately, or unfortunately, a lot of Central Banks around the world have been pulling away from the dollars, and trading in gold. Ironically, Nigeria has gold, so why can’t we start investing in our solid mineral industry and shy away from the dollar?
“Some time ago, I heard the NNPC is encouraging nations that buy our Oil or crude to pay us in Nigeria. I don’t think they have been serious about it. That is why certain countries are joining the BRICS, which is another mitigation against the dollar.
Do not get me wrong, I am not saying Nigeria should join BRICS, of course joining BRICS is not a bad idea. Three of the largest Economies in the world, India, China, and Russia, are already members of BRICS.
“And these countries that are already members of BRICS, are already doing business with themselves with their currencies, which is while their respective currencies are gaining in value. Again, the Chinese Central Bank has been deliberately devaluing their currency. Now, if that is happening, which is people need your currency, and for that reason, and you deliberately devalue, that is fine.
Recall that the decision of the Central Bank of Nigeria in respect of the $2.9 billion Gazelle Funding Account, came to the public glare after the FAAC Post Mortem Sub-Committee members noticed in last month’s report from the Nigerian National Petroleum Company Limited (NNPCL) that proceeds from Production Sharing Contract (PSC) Tax and Royalty sales were transferred to the Gazelle Funding account.
The CBN backed NNPCL’s explanation, stating further that the Federal Government secured the $3.3 billion loan from Afrexim Bank to stabilize the forex market.
The sub-committee report said: “The structure of the loan requires NNPCL to deposit PSC Royalty and Tax proceeds into the Gazelle Funding account. From these deposits, 90 percent will be released to NNPCL and CBN, while 10 percent will go towards repaying the loan.”
Reacting, Brain said, the move could address the challenge in the interim. “It’s a good move, but the question is would it be enough? Because our foreign exchange demand from my perspective is more than $ 2.9 billion. If it is for the short term, which is a “stock plug” it’s fine.
“But if it is what they think we solve our foreign exchange needs for the rest of the year, then that is a lie. That will not be possible.
“In the long term, it is not going to help us out as a people, for instance, how much did the Central Bank of Nigeria clear when Mr. Cardoso came to office? When did he become the Governor of the Central Bank of Nigeria? Thus, there is no way that the said amount can make a huge difference. In the short term, it is fine.
He charges the Central Bank of Nigeria to strengthen the economy through local solutions. “When people do not need your currency, and you deliberately devalue it, you are devaluing your economy.
“You are simply killing your economy, that is the implication and that is what is playing out now in our economy. So we need to start looking less at the dollars and look more at our currency. How do we strengthen our currency? The sum of $2.9 billion is fine, but much more, we need to look into how we can strengthen the naira through a local solution”
Meanwhile, members of the FAAC sub-committee, who recognized the potential benefits of special funding for forex stability, have raised concerns about the process and transparency of the loan arrangement.
“Representatives from states and local governments noted that they had not been informed about the loan before this meeting,” Responding to the concern, the sub-committee has asked the NNPCL to organize a stakeholders’ meeting to offer a platform to inform all relevant parties about Project Gazelle Funding and explain the purpose, structure, and repayment plan for the loan.
The source said: “The goal is to ensure transparency and accountability. The stakeholder’s meeting is expected to address several issues, including The criteria used to justify the $3.3 billion loan amount; the selection process and reasons for using a special purpose vehicle for the loan; the long-term implications of using future oil sales as collateral and measures to ensure transparency and accountability in managing the loan.