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By Dr Peter Odion Omoijiade

Abstract
The Nigerian economy is on its road to perdition as a result of currency hoarding and the cartelization of the foreign exchange market by banks and their close substitutes. The value of our National currency is declining inexorably; as a result of round-tripping, speculation, anti-economic development actions, and other insidious acts. The wide disparity between the official exchange rate and the parallel market rate is now motivation for brain drain/skills drain and increase in prices of goods and services. The wide gap between lending and borrowing rates of banks contributes to a high propensity to hoard money. The hoarding of money is now an enabler of the foreign currency cartels. The growth of foreign exchange cartels in Nigeria is highly dependent on the corruption in the system. The process of arbitrage tends to drive prices in the triangular foreign exchange market. Corruption, currency hoarding, cartelization of the foreign markets, the devaluation of our national currency, and inflation are therefore mutually interdependent.

The Central Bank of Nigeria (CBN), Banks and parallel market operations are actors in the triangular foreign exchange market. The hoarders of currencies fund the parallel market. The importers source their foreign exchange at high exchange rates culminating in high prices of goods and services. The rate of hoarding as an integral part of accumulation is dependent on the expected rate of profit and the absence of sanction where applicable. The boom in hoarding is an enabler of the prosperity of the substitutes of Banks within the triangular foreign exchange market.

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This study therefore examines the nexus between corruption, currency hoarding and the cartelization of Nigeria foreign currency markets with a view to establishing their determinates on the economy. This research is based on existing theoretical and practical knowledge on economic history, economic thought, foreign exchange, hoarding, debt and international trade. Data was collected from the literature on these concepts by means of critical analysis of literature and dialectical reflection about my understanding of the emerging themes. I also observed directly the foreign exchange trading and movement of prices within the context of study. This research will create the needed understanding of the dynamics of the Nigerian foreign exchange market.

KEYWORDS: Economic history, Economic thought, Central Bank of Nigeria (CBN), Banks, Substitutes of banks, Corruption, Currency hoarding, Cartelization of foreign exchange market, Devaluation of National currency and Foreign exchange market.

1.0 INTRODUCTION
The foreign exchange cartel is now visible in the Nigerian economy. In the determination of the value of our national currency, the defeat of speculators in foreign exchange cartels must attract the attention of the managers of the economy and the political leadership. The Nigerian economy is on its road to perdition as a result of currency hoarding and cartelization of the foreign exchange market by banks and their close substitutes. The threat of these entities must be addressed urgently. While no single entity can single-handedly build an endearing economy, the wrong entities, vested with power can single-handedly bring an economy down (Collins, 2009). At this stage of our neo-colonial economic development, it is a dynamo of danger to ignore currency hoarding and cartelization of the foreign exchange market. In this study, I will examine the nexus between currency hoarding and the cartelization of the Nigerian foreign currency markets with a view to establishing their determinates on the economy.

2.0 PROBLEM ANALYSIS
The wide gap between the lending and borrowing rates of bank contribute to high propensity to hoard money. As argued by Keynes (1933), the habit of overlooking the relation of the rate of interest to hoarding may be a part of the explanation why interest has been usually regarded as the reward for not hoarding.
On the 14th of March, 2017, the Economic and Financial Crimes Commission (EFCC) intercepted N49,000,000.00 at the Kaduna international airport (http://www.vanguardngr.com/2017/03).

The EFCC on 7th of April, 2017 uncovered N448,850,000.00 in a shop at Legico shopping plaza, Ahmadu Bello way, Victoria Island. The money was earmarked for the purchase of foreign currencies. In the house of a former NNPC MD, the EFCC also discovered U$9,800,000.00 (https://www.naij.com/1098330). On the 16th of April, 2017, the EFCC found U$43,400,000.00, €27,000.00 and N23,000,000.00 in an apartment in Lagos (https://www.today.ng/news/nigeira/287011/recovered-cash-efcc-probe-vip-tenants-osborne-towers). On the 29th of April, 2017, the Nigeria Customs Service found U$1,300,000.00 concealed in the luggage of a passenger at the airport (29th April, 2017, NTA, 7.00 pm news).

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The growth of foreign exchange cartels in Nigeria is highly dependent on corruption in the system. The process of arbitrage tends to drive prices in the triangular foreign exchange market in Nigeria (Lipsey and Chrystal, 1999). The possibility of arbitrage is self-evident in the triangular foreign exchange market. The CBN sells foreign exchange to banks at a lower exchange rate. The banks through round tripping, sells the foreign exchange in the parallel market at a higher rate. The parallel market operators sell to the public at a higher rate.

Rewane (2017), highlighted the pervasive under-hand dealings in the foreign exchange market that should be eliminated for the market to support the growth plan of the economy when he stated:

We have these vested interests that are benefitting from the exchange rate system. It goes like this; I borrow money in intervention fund at 6 percent. I use that money to invest in treasury bills at 18 percent, I use the treasury bills as collateral to borrow money to buy foreign exchange at N305 per dollar, I sell the foreign exchange at N500 per dollar. Nobody in the world, even the Pope, will not be tempted. So you must remove what is called structurally induced corruption. Corruption is not about missing money, it is taking advantage of the position to earn rent and selling patronage.
In the next section, the research statements that are relevant to this study will be outlined.

3.0 RESEARCH QUESTIONS/STATEMENTS

  1. The Nigerian foreign exchange market is triangulated by the Central Bank of Nigeria, Banks, and the parallel market.
  2. There is a link between the cartelization of the foreign exchange market and the exchange rate.
  3. High exchange rates contribute to the rise in the level of prices of goods and services/high level of inflation.
  4. Low exchange rate leads to a fall in the level of inflation?
  5. There is a nexus between corruptly acquired debts, hoarded funds, and funding of the parallel market.
  6. The funding of the parallel market with hoarded funds triggers high exchange rates and the general rise prices.
  7. The enabling of the demand and supply of foreign currencies with hoarded funds distorts the equilibrium in the triangular foreign exchange market.
  8. 4.0 LITERATURE REVIEW
    Hoarding is the diminution of money in circulation (Steiner, 2010). As pointed out by Magnusson (1993), under mercantilism, in order to ensure sufficient circulation of currency, regulations restricting hoarding were put in place. Jean-Baptiste posits that hoarding of savings should be allowed if investment opportunities are lacking (Hutchison, 1980). The paradox of hoarding must be acknowledged. Success in trade leads to wealth, which induces rich people to hoard their wealth and also stimulates the demand for foreign luxuries (North, 1691). As argued by Keynes (1937: 210), the increased demand for foreign exchange, resulting from an increase in activity has a backwash that tends to raise the rate of interest.
    The increase in demand for foreign luxuries which stems largely from the activities in the triangular foreign exchange market, depresses the external reserves of the country and increase in prices of products and services as a result of high exchange rate.
    Kalecki (1951 [1993]) in his study of the Israeli economy, identified the problem associated with hoarding of liquid assets. According to Kalecki (Kalecki (1951 [1993]:97), “the accumulation of unspent liquid funds, combined with uncertainty of the future official rate of exchange, creates a natural tendency for illegal transfers abroad which depress the Israeli pound in the black market in foreign exchange. Such a black market is the common experience of countries with a strained balance of payments necessitating the maintenance of exchange restrictions”.
    The rate of hoarding as an integral part of accumulation is dependent on the expected rate of profit and absence of sanction where applicable (Bhaduri, 2003). The boom in hoarding is an enabler of the prosperity of the substitutes of Banks within the triangular foreign exchange market. As stated by Keynes (1937: 210), “booms carry within them the seeds of their own destruction”. In a boom, the engagement of cartels in an “investment race” which through its impact on the overall level of demand, lift prices and the profit margin of cartels (Kalecki, 1899-1970).
    Hume (1752, 1985: 321), outlined the advantages of hoarding. According to Hume, hoarding decreases the quantity of money in circulation in a country, lowers prices, favours sales (which encourages commerce and industry), and allows more money to flow in. If money continues to be ‘annihilated’, its inflow will keep ‘encreasing’. To show how effective this method is, Hume offers a list of historical examples of the power of hoarding: Geneva, despite being such a small city, engrossed nine-tenths of the money of Europe.
    Hume is not alone in claiming that hoarding is necessary to keep money ‘still encreasing’. Before him, John Houghton ([1681-1683] 1728) claims that hoarding would lead to an increase in imports of bullion from abroad. Vanderlint ([1734] 1970) approves of the practice of the East Indians of burying silver underground to keep prices low. After Hume, Lord Kames Henry Home (1774) supports a state treasury because “it could absorb a redundancy of currency, which otherwise would get into circulation, raise prices, and thus hamper trade” (cited in Viner 1930: 273.3).
    The power of individuals and organizations to divert currency hoarding to improper ends is fully acknowledged by Paganelli (2009:65 – 85 ), when she stated that:
    … any private citizen today could play a role in expanding and contracting the quality of money either by changing the amount hoarded or by changing the amount employed in alternative uses.
    The money hoarded is sometimes an integral part of national debt. Fisher (1933: 341) wrote:
    Over-indebtedness to start with and deflation following soon after; that where any of the other factors do become conspicuous, they are often merely effects of symptoms of these two.
    The hoarded money which is part of debt is a dynamo of the money hoarded. The initial buildup of debt is related to hoarded money. According to Fisher (1933: 349), the public psychology of going into debt for gain passes through several more or less distinct phases: (a) the lure of big prospective dividends or gains in income in the remote future; (b) the hope of selling at a profit, and realizing a capital gain in the immediate future; (c) the vogue of reckless promotions, taking advantage of the habituation of the public to great expectations; (d) the development of downright fraud, imposing on a public which had grown credulous and gullible.
    The use of bank-credit is too open to abuses. (Hume [1752] 1985: 318 – 320). Hume’s position against public credit in the essay ‘of public credit’ is the flagship in battles against public credit and his statement that “either the nation must destroy public credit, or public credit will destroy the nation” was made a popular motto in the anti – public credit propaganda campaigns of the 18th and early 19th century (Hume [1752] 1985: 360 – 1).
    The Academic Staff Union of Universities (ASUU) and the Nigeria Labour Congress (NLC) established the link between national debt and stolen or embezzled money. ASUU (1984: 17), found that banks, insurance corporations and other financial houses aid the illegal transfer to foreign countries of wealth and monies stolen or embezzled by foreign and indigenous contractors and politicians.
    The patriotic and the anti-imperialist perspective of ASUU is supported by the Nigeria Labour Congress (1985: 15), when they called on the government to carry out the following with a view to solving the debt problem of Nigeria:
    i.) Government should investigate and make public how we incurred all our internal and external debts and what it was used for
    ii.) Probe the possible collaboration of the lending institutions to fraudulently indebt Nigeria i.e. did they wave aside strict lending regulations or not, especially as the financial indiscipline of the 2nd republic was quite clear.
    Some of the major themes captured in section 2.0 and 3.0, were addressed under section 4.0. In the next section the methodology underpinning this research will attract attention.
    5.0 METHODOLOGY
    This research is based on existing theoretical and practical knowledge on economic history, economic thought, foreign exchange, hoarding, Debt, and international trade.
    Data was collected from the literature on these concepts by means of critical analysis of literature and dialectical reflection about my understanding of the emerging themes.
    I also observed directly the foreign exchange trading and movement of prices within the context of study. The importance of observation and its link to validity was summarized by (Gillham, 2000), when he stated that “the overpowering validity of observation is that it is the most direct way of obtaining data. It is not what people have written on the topic. It is not what they say they do. It is what they actually do”. This provided insight into what people “actually do”, or for my case, ‘actually talk about’ in certain settings (Griffins, 1985).
    6.0 THE CONCEPTUAL FRAMEWORK
    As depicted on the conceptual framework, there is a nexus, between the Triangular foreign exchange market, exchange rates and prices of goods.

Fig 1: The conceptual framework

As shown on fig.1, the CBN, Banks and Parallel market operators are the actors in the triangular foreign exchange market. The hoarders of currencies, fund the parallel market. As stated on fig 1, the importers source their foreign exchange at either high or low exchange rates. While importations with high foreign exchange rates culminates in high prices of goods, importation with low foreign exchange rates leads to low prices of goods.
7.0 KEY FINDINGS AND IMPLICATIONS
This section presents key findings of the research and their correlation with previous research
FACTORS RESPONSIBLE FOR THE FALL IN THE VALUE OF THE NAIRA/HIGH EXCHANGE RATE
i) Withdrawal of capital from Nigeria
ii) Speculation
iii) Round tripping: illegal channeling of funds from the official market to the parallel market
iv) Anti-economic development
v) Lack/low foreign investment
vi) Corruption
vii) Public sector inefficiency
viii) Increase in imports without corresponding increase in exports
ix) Unemployment
x) Insiders related abuses by CBN and commercial bank employees
xi) The sale of air tickets by airline operators at parallel market rate
xii) Oligopolistic behavior of foreign exchange cartels
8.0 THE CONSEQUESNCES OF HIGH EXCHNAGE RATE
i.) POTENTIAL DRAIN OF SKILLS/BRAIN DRAIN
The drain of skills to developed countries as a continuing process, termed as reverse transfer of technology will assume alarming dimension if the fall in the value of the naira is allowed to continue. We should remember the famous “Andrew don’t check out” jingle in the 80’s. With huge social costs involved in training of professionals in Nigeria, the beneficiaries will turn out to be the developed countries. The drain of skills from Nigeria to developed countries will constrain our ability to innovate. This is a dynamo of danger as sustainable competitive advantage is no longer on the basis of resource endowment but innovative capacity. The optimum utilization of capacities by manufacturers are now constrained as a result of the dwindling value of the naira.
ii.) Higher prices of goods and services
iii.) Unemployment
iv.) Insecurity
v.) Crime
vi.) Lack/low foreign investment
vii.) Low economic growth and development
9.0 RECOMMENDATIONS FOR THE MITIGATION OF THE FALLING VALUE OF THE NAIRA/HIGH EXCHANGE RATE
i) Institutions of measures against anti-development elements
To enable the leadership defeat all counter-revolutionary elements and reactionaries, the present change agenda must be predicated on a revolutionary structure. You cannot put a new wine in an old wine skin. We cannot ill afford the luxury of allowing vital organs of the state to remain in the hands of anti-change agents. Those who are not willing to change in the Central Bank of Nigeria and Banks, should be changed or sent on further training.

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ii) Synergy between monetary and credit policies
The present disconnect between monetary policies and credit policies must be corrected. To enhance the growth of the real sector and the agricultural sector we must revisit the sectorial distribution of credits to the high and low priority sector.

iii) The institution of anti-speculation measures
In correcting the phenomenon of speculation, the temptation of abolishing/over regulating the black market should be avoided. The abolition/over regulation of the black market will only help the growth of the sector. However, to prevent the diversion of the parallel market to improper ends, it is necessary to affect the demand for foreign exchange in the parallel market. The present speculation in the parallel market is as a result of the demand for their services.
The authorities should put measures in place to curtail the demand for foreign exchange in the black market through enhancement of the ability of banks/Authorized dealers to deal in PTA (Personal travelling allowance), BTA (Business travelling allowance), school fees etc.

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iv) Sanction against round tripping
The regulatory authority must identify and punish banks that engage in the illicit act of channeling funds from the official market to the black market.

v) The operation of Bureau De Change by Banks
To prevent round tripping, commercial banks should be banned from operating Bureau De Change.

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vi) Curtailing insiders related abuses by CBN and commercial bank employees
The CBN and commercial bank employees and their proxies should not be allowed to own/operate bureau de change or similar institutions dealing in foreign exchange. The force of the argument on the nexus between related insiders abuses and the dwindling value of the naira must be felt. For example if electricity workers are encouraged to sell generating sets, their fortune will be enhanced if the nation remains in perpetual darkness.

vii) Curtailing the sale of Air tickets with the parallel market rate
While Airline operators repatriate ticket sales at the official rate, they effect the sale of tickets at the parallel market rate. This is brazen exploitation of customers. To enable us narrow the difference between the parallel market and official market rate, Airlines should not be allowed to sell tickets at the parallel market rate. The sale of tickets should be at the official rate. This measure will assist in driving down the demand for foreign exchange at the parallel market.
10.0 OTHER MEASURES FOR THE MITIGATION OF THE FALLING VALUE OF THE NAIRA/HIGH EXCHANGE RATE
• Attraction of foreign investment
• Increase in export
• Decrease in import
• Diversification of the economy
• Repatriation of stolen funds
• Fight against corruption
• The regulatory authorities and the security agencies must ensure banks adhere to foreign exchange regulations.

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11.0 CONCLUSION
The present level of corruption, currency hoarding, cartelization of foreign exchange market, the devaluation of our national currency and inflation are mutually interdependent.
As a result of the action, inaction of the Central Bank, round tripping, speculation, anti-economic development actions and other insidious acts, the value of our National currency is declining inexorably; with attendant increase in prices of goods and services. The danger of the wide disparity between the official exchange rate and the parallel market rate is a motivation for brain drain/skills drain. The direct consequence of this is low innovative capacity which is vital for our national growth and development. We must recognize that the skills of our professionals are within the rubrics of investments. Investments move from an unsafe environment to a safe environment.
To enable us mitigate the travail of our national currency, we must learn the lesson of success through study of past failures. The management of our national currency and monetary policies should no longer be the responsibility of “to whom it may concern”. The CBN must assert its institutional identity through proper management of the National currency. The political leadership must examine the core competences of the CBN in the management of our National currency. Where it is established that they are not capable of mitigating the dwindling state of our currency, the government should explore cultivating the core competence of those that will contribute to our importance and arrest the present decline. The crisis facing our national currency will continue to persist and the leadership will continue to institute one reform after another. The crisis will not abate until we explore more enduring alternatives. The time for action is now. Delay is dangerous.

REFERENCES
Academic Staff Union of Universities (1984) How to Save Nigeria, Ibadan: Iva Valley Compugraphic Printing Works.
Collins, J. (2009) How The Mighty Fall, New York: Harper Collins, P.62
Fisher, Irving, “The Debt Deflation Theory of Great Depressions”, Econometrica, 1(4): 337-57 October 1933
Gillham, B (2000) Case Study Research Methods, London and New York: Continuum
Home, Henry, Lord Kanes (1774-5) Sketches of the History of Man, Dublin – Printed for J. Williams
Houghton, John 1681 – 83 A collection of Letters for the Improvement of Husbandry and Trade, London: Printed for Woodman and Lyon
Hume, David 1752 Essays: Moral, Political and Literary, ed, Miller, Indianapolis: Liberty Fund
Hutchinson, T.W. (1998) Before Adam Smith: The Emergence of Political Economy 1662-1776. Oxford: Basil Blackwell
Kalecki, Michal (1899-1970) In Halex, J (1992) “Kalecki and Modern Capitalism”, Monthly Review, June 1992
Keynes, J.M “The General Theory of Employment”, The Quarterly Journal of Economics, 51(2), Feb, 1937
Lipsey, R.G & Chrystal, K.A (1999) Principles of Economics (9th Edition) New York: Oxford University Press Inc
Magnusson, L. (1987)” Mercantilism and Reform- mercantilism: The Rise of Economic Discourse in Sweden during the Eighteenth Century”, History of Political Economy, 19:3
Nigeria Labour Congress (1985) Towards National Recovery: Nigeria Labour Congress Alternatives, NLC Secretariat, Yaba Lagos.
North, D ([1691] [1907]) Discourses Upon Trade, Lord Baltimore Press
Paganelli, M.P (2009) “David Hume on Monetary Policy: A Retrospective Approach”, Journal of Scottish Philosophy, 7(1), 65 – 85.
Shiller, R.J (2011) “Irving Fisher, Debt Deflation and Crisis”, Cowles Foundation for Research in Economics, Yale University.
Steiner, A (2010) The Plans That Failed: A Economic History of the GDR, New York: Berghahn
Vanderlint, Jacob 1734 Money Answers all Things; or, An essay to make money sufficiently plentiful, New York: Johnson Reprint Corp.
Viner, Jacob (1930) “English Theories of Foreign Trade Before Adam Smith”, The Journal of Political Economy 38(3), PP.249-301 and 38(4) PP.404-57

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