<p></p><p>President muhammadu buhari's decision to devalue the Nigerian naira is a dramatic policy U-turn after 10 months of denying that he had any such intention. Buhari insisted that devaluation was a symbol of national weakness and that it would only boost inflation since Nigeria imports even toothpicks. Unfortunately, macroeconomics is rarely the forte of military rulers, as then-General Buhari proved in his disastrous first stint in power in the 1980s, seizing power in a coup in 1983 and losing it in a countercoup two years later led by General Ibrahimu Babangida, who I met on a trip to Lagos in 1991. A naira devaluation was inevitable since the peg rate was 198 while the black market rate was as high as 370 to the dollar. In emerging markets, the black market exchange rate reflects supply and demand, the official rate only presidential fantasies. <br></p> <p>Four macro forces made a naira devaluation inevitable in June 2016. One, oil prices - on which Nigeria depends for 90 per cent of its foreign exchange earnings and 70 per cent of government revenue - had fallen from $148 Brent in July 2008 to a mere $46 now. Two, Nigeria's oil production had slumped from 2.1 million barrels a day to a mere 800,000 now, due to an escalation in militant sabotage after President Buhari cut the "amnesty" (bribes) deal agreed by the Goodluck Jonathan regime. The sudden, draconian fall in oil prices and output haemorrhaged Nigerian foreign exchange reserves and made devaluation a one way speculative bet, despite Buhari's repeated denials. Shorting the Nigerian country index fund in New York was unquestionably the rational strategy to position for this event; the index dropped 10 per cent after the day the Central Bank of Nigeria announced that the naira would be set "entirely by market forces". This meant a 30 per cent devaluation of the naira. <br></p> <p>Three, the auditor-general of Nigeria reported $16 billion in petrodollar revenues vanished from Nigeria in 2016. Even by the standards of elite kleptocracy in Africa, this was a huge sum in the twilight of the Jonathan era. Nigeria was literally robbed blind by its outgoing PDP government, led by the lucky guy in a black fedora hit from the Niger Delta. <br></p> <p>Four, the IMF had long insisted that Nigeria devalue the naira and raise petrol prices in exchange for an emergency loan. No coincidence that petrol prices soared 80 per cent at the pump as soon as central bank threw in the towel on the naira peg. If Buhari must accept the king's (IMF) shilling, Nigeria must do the IMF's bidding - and this is exactly what happened with the naira devaluation. The "Washington consensus" is alive and well in Africa's largest economy. <br></p> <p>Buhari's punitive, selective anti-corruption programme is mainly directed at the opposition PDP, the party of Jonathan. In a country where law enforcement often moonlights as extortion rackets, Buhari amplified capital flight from Nigeria even as oil prices and oil output collapsed, a triple whammy for Abuja's hard currency reserves. The decision to impose a VAT (another classic IMF "structural adjustment" thingy) in the midst of a deep recession might make economic common sense to the officers in Victoria Island's Dudomi barracks but make no sense to me, a lifelong student of credit cycles and emerging markets. It is pity that Buhari undermined the independence of the central bank by repeatedly contradicting Governor Godwin Emefiele in public and pledging not to "kill the naira" by a devaluation that every intelligent foreign investor knew was inevitable. All Buhari created was a chronic shortage of foreign exchange that gave speculators a one way bet on naira forwards and enabled insiders to make a killing in the currency black market. <br></p> <p>Now Nigeria faces recession in 2017, a possible rift between the Hausa Fulani north and Christian animist south widens while Boko Haram terrorises the northeastern states and Mend secessionists hold the Niger Delta hostage. Nigeria's history is steeped in blood, with successive military coups, civil wars, ethnic revolts, assassinations (Lagos airport is named after a murdered military [resident) and the horror of the Biafra civil war. Africa's financial superpower, a nation of 187 million people, cannot degenerate into a basket state. The nation that gave the world Wole Soyinka, Chinua Achebe and Femi is nation of effervescent, beautiful men and women with the gift of laughter. Buhari's naira peg was from a bygone era. Russia, Angola, Kazakhstan and Mexico have all devalued their petrocurrencies - and Niger joins the clean float club. <br></p> <p>The new exchange rate regime means inflation, now 15.6 per cent, will probably surge to 20 per cent unless the central bank squeezes the money supply. This means the Nigerian naira falls to 400 against the US dollar in the next four month. Brexit is the UK's Biafra and means King Dollar runs anole again.<br></p><p></p>