In the last four weeks, something good, a silver lining if you like, has begun to happen to the strength of the naira. From a steep valuation dip to N1,900, it has recently regained lost ground and currently stands at N1,300 to the United States dollar. Whatever policy instrument(s) ramping up its value upwards is evidently good policy and should be encouraged and supported by all. We need to be consistent in our policy making and we must stay the course and give credit to the current actions of the Central Bank of Nigeria.

The credibility of the CBN is critical to its performance and execution of its remit. Against the backdrop of their arrest of the free-fall of the naira, that credibility has been given a boost. The positive actions of the new team at the CBN and the Ministry of Finance have been acknowledged by a wide consensus of opinion leaders and talking heads. We are glad they are delivering so far and that momentum must now be sustained. They should now aim for economic growth supported by a fairly stabilised naira. Some of the steps taken so far indicate that they have a good handle on what needs to be done.

Aligning the naira currency was a sound monetary policy. No matter what difficulties it has brought in the short term, I believe the benefits ahead will in the long run make us forget the current woes. The new beneficiaries of the aligned naira are the states and local governments who now get a much larger share of the new naira value at their FAAC allocation. It is expected that the uplift will trickle down to better provision of services to the people.

I have always advocated the benefits of policy consistency and in addition, held on to the conviction that it was best to let the market determine the value of the naira even if we have to experience a worse situation before a better one. There are those who argue that these are the International Monetary Fund and World Bank prescriptions, but I counter-argue that these are simply rationality and logical economic positions as we cannot have multiple exchange rates for the naira. It does not help our economy in any way and any benefit of such a forex regime only goes to a very small group of people

The CBN has also been pragmatic in pushing interest rates up, in its last two Monetary Policy Committee meetings and we are already seeing the gains. The need for interest rates to go up temporarily for now is understandable. It is another “no alternative” option. Given that inflation has been at its highest for several years and is complicated by massive liquidity in the economy, this is the only effective measure to squeeze out the excess liquidity in the economy at this crucial time. The excess liquidity in the system is what is pushing inflation up and stoking forex demand.

Anyone familiar with my previous writings on the subject knows that I am not in favour of high interest rates. I have always preferred growing out of inflation, as the preferred option, but the current inflation rate at 30 per cent plus requires high interest rates to be near the real rate of return to attract investments into the economy. Our ideal aspiration should always be to have the real rate above inflation.

Over and above any other measures that the CBN has taken, it is the Binance issue that has resonated very strongly. Since Binance took out naira from its trading platform, its positive outcome has been obvious for all to see thus far. In many jurisdictions, Binance has been denied a platform to trade. The United Kingdom, China, Japan, Malaysia, Thailand, and the province of Ontario in Canada, have all said no to Binance trading.

It has also been charged with offences of money laundering in the US, where Binance pleaded guilty to those charges, and accepted to pay a fine of $4.3bn. They have also been charged with conspiring to run an unlicensed money transmitting business, and violating banking laws in other jurisdictions.

The CBN’s attention was drawn to the significant role Binance was playing in the naira devaluation. That a $26bn value of naira traded on Binance in a very short period in the world’s biggest crypto exchange points to the obvious manipulation and speculation that was going on. Let me note here that whatever happened, it was Nigeria’s bad financial policies that enabled it.

The issue now is what to do with Binance and what case can be made against it for its injury to our economy from the trading that went on. I do not stand with those who say Binance has done nothing wrong. It has done wrong even if not by commission, most definitely by omission. The trading platform is a global brokerage like Interactive Brokers and our own Bamboo. While Binance offers crypto as tradable securities, Interactive Brokers offers equities, commodities, and currencies as securities, and Bamboo specifically offers US equities.

Setting aside whatever securities that are offered, they are all trading platforms, with participant Nigerians. Once Nigerian investors are involved, the Nigerian government is involved by extension. Since it acts like a brokerage and collects monies from participants to trade/speculate on its platforms and earns a commission, it is liable to taxes; at least VAT and it should have Know-Your-Customer details. KYC is its only defence against money laundering, so the demand for its top 100 customers trading from Nigeria becomes tenable. KYC is meaningful when it is required in an unusual circumstance, as in the case of what has happened to the naira.

The other two brokerages mentioned here require KYC and also collect taxes as part of the transaction costs. There is therefore no basis for Binance to go without sanctions.

It is heart-warming that the charges brought against Binance have been thoroughly reasoned and there was no need to go overboard. The next step would be to allow the courts to set bail and free the Binance executives held under house arrest. We should act according to globally accepted legal standards and allow the courts to discharge their duties and if they think they can escape justice, remind them about the P&ID case, where Nigeria got justice in the UK courts.

The way to stabilise the naira requires a multilevel approach. The first is to build up our forex reserves. Having a healthy reserve gives trading partners confidence. We also need to promote exports, reduce imports and increase our oil production. Anything short of improving these measures will be sub-optimal in dealing with our currency troubles.

We also need to cut waste and cost of governance, with a much more purposeful fight against corruption. These actions will give investors confidence in Nigeria.