Grace and Her Tiny Skimpy Little Towel

April 15, 2016

It must have been the May 27th Children’s day festivities of either 1985 or 1986. As usual, all secondary schools in Enugu were mandated to turn up for a march-past parade at the Polo Park. Thankfully for left-legged marching soldiers like me, the school’s Man ‘O’ War Cadet served as a standing march-past brigade. At the time the practice was that after the usually colourful parade, the State government provided refreshments to all student participants, usually soft drinks.

So on that day in 1985, or was it 1986, there I was (actually a number of my classmates and I) strategically positioned by the school water tank, minding my own business (as usual), and doing my laundry. The positioning was because I knew that the school dinner bell would soon sound so that I can dash into the refectory, hopefully conduct a massacre and fill my constantly growling belly with the Saturday lunch of eba and okro soup….then the school Games Prefect saunters by…and hollers the dreaded ‘One-Two-Three Boysssssssss!!!!’ Usually, the last student to run up to the Senior student / Prefect will run the errand that elicited this reknown fagging call….and unfortunately, this time I came in last. The Prefect pointed to three crates of Coca-cola products stationed by the water tank, refreshments for female students who participated in the aforementioned march-past, and ordered (or ‘sent’ in the parlance of the day) my friend Tope and I to carry the products to the female hostel.

Not wanting to lose my vantage position by the Refectory or (God forbid!) possibly ‘missing’ my lunch, I was determined to execute the errand immediately, but Tope had other ideas as he had a deadline to wash a mountain of clothes for his school father. By the time he was done with the laundry a steady drizzle had started. But what was a little rain to deter us from the task assigned by a Prefect?..and a ‘wicked’ prefect at that. So we set out for the female hostel.

For those who know Federal Government College Enugu and the location of its female hostel, Enugu, as the name implies comprises several hills, declivities and acclivities. The female hostel was set in one of the declivities, almost like a valley, while the road leading up to it was the acme of one of the several little hills. Piedmont that hill, just at the point the slope levels out, is a basketball court, smack in front of the first block of female dormitories and the Home Economics laboratory.

By the time we approximated the female dormitory, the drizzle had turned into a ferocious downpour and boisterous female students, not expecting any male student out in such inclement conditions, were out in the rain…most barely clad. This particularly pretty senior girl, Grace, who I had a massive crush on (and I am sure I wasn’t the only one) was out in the rain, on the basketball court….clad only in a very short towel that covered her chest with her pelvic region partly exposed.

Tope, who I had always assumed to be a worldly ‘Lagos boy’ (then ‘Lagos boys’ were thought to be more worldly than those of us from the hinterlands, but I digress) broke out in TB-Joshua-like ecstatic vibrations and ululations. His first coherent exclamation was “Jex! Jex! Jeeexxxxxxxx! Seeeeeee!!!! Nyassshhhhhh!!!” At that point, Grace’s first reaction was to cover her lower body (remember that the towel barely covered her pelvic region) inadvertently exposing her chest, eliciting a variant of the first exclamation from Tope, “Jex! Jex! Jeeexxxxxxxx! Seeeeeee!!!! Boobiiiiiiii!!!” after which all that came out of his mouth was incoherent gibberish while shaking violently.

The girls on the basketball court took off in different directions. Grace for some reason, was frozen in shock, and caught in a macabre dance of pulling down her towel to Tope’s screams of ‘see nyash’ and pulling it up when he blurts out ‘see boobi!’. This continued for what I felt was eternity in teen-crush-time (probably a couple of seconds in the real world) till a female prefect, peeped out of a doorway and screamed at us to drop the drinks on the road. Suffice it to say that Tope remained in a zombie-like trance, physically quivering and stuttering ‘see nyansh!’ and ‘see Boobi!’ till I guided him safely (both of us drenched to our skins), back to the male hostel.

The upandan oscillation of Grace’s towel and her intermittent exposures, reminds me of Nigeria’s new Renminbi Currency Swap deal with China. In Grace’s circumstance the colour or texture of her towel was irrelevant. Whether it was US$ denominated or Renminbi denominated, the fundamental problem was the size. Clad in a bigger towel with better ‘coverage’ Grace could possibly have defied our presence.

Let me try and explain this with another analogy.

A trader deals in donkeys and camels. At every point in time he has either a donkey or a camel. Every market day he barters with his favourite onye-afia customer; the day he has a donkey, he gets a camel and the day he has a camel he receives a donkey in return. But his stock never increases, oscillating between a donkey and a camel, and he never has enough to purchase other items or even take care of some of his basic needs. One day he decides to find another onye-afia. So he sets off across town, finds a willing partner and this time around barters his donkey for a monkey.

Now will this transaction yield him a monkey and a camel, a monkey, a donkey and a camel, or just a monkey? In getting the monkey did he not forfeit the opportunity to get a camel or a donkey or both or “the three both of them”?

Today the top export destinations of Nigeria are India (US$12.4Billion), the United States (US$10.9Billion), Brazil (US$9.7Billion), Spain (US$7Billion) and the Netherlands (US$5.12Billion). The top import origins are China (US$11.6Billion), the United States (US$5.89Billion), the Netherlands (US$3.59Billion), Belgium-Luxembourg (US$3.08Billion) and India (US$2.69Billion). So we earn 52% of our foreign exchange from India and USA while we spend about 43% of it in China, implying that to achieve the celebrated full trade focus on China will need a shift of our exports from India, the US, Brazil, Spain and the Netherlands to China principally…which I guess is what China wants.

Let us assume that what we have done is to effectively tie all our sales / export proceeds to China 9assuming China has the demand), it still does not in any way enhance our earning capacity. The price of crude is still benchmarked in US$ so if the price does not rise we will run into the very same problem we think we are running away from…a shortfall in our Renminbi earnings to service our newfound love in Yuan denominated debt obligations (remember Grace and her towel and the trader and his barter partners?). The crux of the problem is that our import earnings has reduced vis-à-vis our export flows, debt and other US$ denominated obligations. How does the Renminbi swap solve this problem?

By the way, what are the other major uses of our foreign exchange other than our trade bill; we have US$ denominated debt to service, the Cash Call for our various Joint Ventures with oil producing companies, Nigerian commercial banks’ credit and debit card obligations to Mastercard and Visa, airline tickets and IATA obligations remittances, school fees, medical tourism bills etc. I doubt that any of these can be serviced in Renminbi. So even if we deal solely with China on trade, we will still need US$ to service our other obligations. If we have forfeited our US$ earnings, then where will these funds come from?

Someone pointed out to me that it’s a Swap (silly!), so we give them our Naira in exchange for as much Renminbi as we want. He reminded me that technically, Central Banks can never go bankrupt because they print their own money. So the more Renminbi we need, the more Naira we print (if we run out).

You see?

Problem solved!

The flaw in that logic is that a country’s currency is essentially an IOU from the issuing state with the assurance that the value of the currency will be upheld on due date. It is totally worthless if not backed by Foreign exchange reserves (unless you are the USA whose currency is backed by ‘full faith’ aka ‘Goodwill’ aka GDP). So technically the more currency you have in circulation, plus liabilities, plus debt you acquire (including the new loans from China and payments owed government contractors etc.), the less your currency will be worth…that is, unless it is a political decision to peg the exchange rate at a certain value. So for the other school of thought that are celebrating arbitrage opportunities, even if they exist, it will be momentary unless a fraudulent individual in China and another collaborator in Nigeria fix the currencies to exploit such an opportunity for personal gain.

Again, the FX earnings that enable us increase our Foreign Exchange reserves (and by extension strengthen our currency) have reduced significantly. Today that reserve is down to US$27 Billion plus and printing more money for a Swap will essentially be printing one liability (Naira) to exchange it for another liability (Renminbi). Even worse is the fact that the price of crude oil, our top FX earner, has not only crashed but Nigeria’s production has dropped from its high and budgeted 2.2 million barrels per day to about 1.7 million barrels per day.

Another question is the convertibility of the currencies involved in this Swap arrangement. There are about 14 freely convertible currencies in the world and neither the Naira nor the Renminbi are on that list. So given that a Currency Swap cannot be for an infinite sum….whether infinite or finite is, what will China do with the Naira proceeds of the swap? Buy Crude from Nigeria (remember that China is not one of our top five export destinations)? Then that takes us back to the intended destination of our crude sales and how we intend to source US$ FX for other identified endeavors. Invest in Nigeria Government Securities and infrastructure? Your guess is as good as mine.

Now, note that this does not have much to do with the new loan from China save for the fact that for us to be able to repay the loan we still have to increase our earnings capacity. The benefit of the loan is self-explanatory given the structure of such loans. Loans from China hardly ever come in cash. What Nigeria will get is its value in Chinese manufactured equipment, technical services, construction, mechanics, materials, engineering work, technical and managerial expertise, and labor services. Any cash disbursements (which in the best case scenario can range from 50% of the project value and oftentimes 0%) will be disbursed in conjunction with the project owners to a Chinese Contractor in the Host Country…in this instance a Chinese Contractor in Nigeria for the requisite value of Chinese labour / technical services / construction mechanics, materials, engineering work, technical and managerial expertise, and labor services. In exchange we get infrastructure and a long term repayment horizon.

So at the end of the day whether it is Multilateral Agencies US$ denominated debt, Eurobond, Panda Bond, Lion, Tiger Bonds or James Bond, anyway you want to spin this, we simply have to increase the size of our tiny skimpy little towel. If not we will forever be caught in this cyclical ‘See nyash! See boobi! of ecstatic and oftentimes sycophantic ululations.

But then what do I know.

8 Responses to “Grace and Her Tiny Skimpy Little Towel”

  1. Kennedy Says:

    What happens if China starts buying our crude oil as part of the deal? What if it is designed as a short term strategy to reduce the pressure on the Naira? Finally, you mean there is no positive gain at all?


    • jekwuozoemene Says:

      Thanks Kennedy.
      I alluded to that point. It appears to be a likely possibility however if it is proven correct then it’s still insufficient. Why? The towel is still too small. The problem is not the currency, it is in the shortfall between our earnings and our obligations.


  2. Thank you so much Jekwuo Ozoemene for analogy very self explanatory.


  3. Brymore Says:

    Fantasticly put. The analogy greatly helps.

    Thanks Ozoemene


  4. i usually don’t do blogs — but this is an exception– i haven’t had a good laugh for a while


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