In a rare and candid interview, former Nigerian military head of state, General Ibrahim Badamasi Babangida (IBB), has criticized the economic policies of former President Muhammadu Buhari, particularly regarding the management of the Nigerian Naira and foreign exchange (FX) rates. Babangida, who ruled Nigeria from 1985 to 1993, revealed that his administration devalued the Naira to prevent foreign exchange from becoming a “deity to be worshipped.” His comments have sparked a fresh debate about Nigeria’s economic policies and the impact of currency devaluation on the nation’s development.
The Context of IBB’s Remarks
General Babangida’s comments come at a time when Nigeria is grappling with severe economic challenges, including a weakening Naira, rising inflation, and a widening gap between the official and parallel market exchange rates. The former leader’s critique of Buhari’s economic policies highlights the divergent approaches to managing Nigeria’s currency and foreign exchange reserves.
During his tenure, Babangida implemented the Structural Adjustment Program (SAP) in 1986, which included the devaluation of the Naira as a key component. The policy was aimed at stabilizing the economy, reducing dependence on oil exports, and promoting non-oil sectors. However, it was also highly controversial, as it led to increased hardship for many Nigerians.
Devaluation: A Necessary Evil?
In his interview, Babangida defended his administration’s decision to devalue the Naira, arguing that it was necessary to prevent foreign exchange from becoming a “deity to be worshipped.” He explained that the overvaluation of the Naira at the time created a situation where access to foreign exchange was limited to a privileged few, leading to corruption and economic distortions.
According to Babangida, devaluation was intended to make the Naira more competitive, encourage exports, and attract foreign investment. He acknowledged that the policy was painful but insisted that it was a necessary step to address the structural imbalances in the economy.
Criticizing Buhari’s Economic Policies
Babangida did not hold back in his criticism of former President Buhari’s approach to managing the Naira and foreign exchange. Buhari’s administration, which ran from 2015 to 2023, maintained a fixed exchange rate for much of its tenure, arguing that it was necessary to stabilize the economy and protect the Naira. However, this policy led to a shortage of foreign exchange, a thriving parallel market, and widespread criticism from economists and business leaders.
Babangida described Buhari’s fixed exchange rate policy as “unsustainable” and “detrimental” to the economy. He argued that by refusing to devalue the Naira, Buhari created an environment where foreign exchange became a scarce commodity, leading to rent-seeking behavior and further economic distortions.
The Impact of Currency Policies on Nigeria’s Economy
The debate over currency devaluation versus fixed exchange rates is not new in Nigeria. Proponents of devaluation argue that it makes the economy more competitive by lowering the cost of exports and attracting foreign investment. Critics, however, contend that devaluation leads to inflation, reduces the purchasing power of citizens, and exacerbates poverty.
Under Babangida’s SAP, the Naira was devalued from about N0.90 to the US dollar in 1985 to N22 to the dollar by 1993. While the policy achieved some of its objectives, such as boosting non-oil exports, it also led to significant social and economic hardships, including job losses and increased prices of imported goods.
In contrast, Buhari’s fixed exchange rate policy was aimed at stabilizing the Naira and curbing inflation. However, it resulted in a shortage of foreign exchange, stifled economic growth, and created a wide gap between the official and parallel market rates. By the end of Buhari’s tenure, the Naira had significantly weakened, trading at over N700 to the dollar on the parallel market.
Lessons from History
Babangida’s remarks underscore the importance of adopting pragmatic and flexible economic policies that respond to changing realities. His criticism of Buhari’s rigid approach to currency management highlights the need for a balanced strategy that considers both short-term stability and long-term growth.
The former leader also emphasized the importance of transparency and accountability in managing the economy. He noted that the over-reliance on oil revenues and the mismanagement of foreign exchange reserves have been major obstacles to Nigeria’s economic development.
The Way Forward
As Nigeria continues to navigate its economic challenges, the lessons from Babangida’s and Buhari’s policies offer valuable insights. Experts have called for a more flexible exchange rate system that reflects market realities while protecting the economy from external shocks. They also emphasize the need to diversify the economy, reduce dependence on oil, and promote sectors such as agriculture, manufacturing, and technology.
The current administration of President Bola Ahmed Tinubu has taken steps to address some of these issues, including the unification of exchange rates and the removal of fuel subsidies. While these measures have been met with mixed reactions, they represent a shift toward more market-oriented policies.
Conclusion
General Ibrahim Babangida’s critique of former President Buhari’s economic policies has reignited the debate over Nigeria’s currency management and foreign exchange strategies. His defense of devaluation as a necessary tool to prevent foreign exchange from becoming a “deity to be worshipped” highlights the complexities of economic policymaking in a resource-dependent country like Nigeria.
As the nation strives to overcome its economic challenges, the lessons from past policies must guide future decisions. A balanced and pragmatic approach, coupled with transparency and accountability, is essential to building a resilient and prosperous economy. The ultimate goal should be to create an environment where the Naira is not just a currency but a symbol of Nigeria’s economic strength and stability.
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