US assault on democracy; what lessons for Nigeria?

By Tony Eluemunor

On April 8, 2022, the U.S. dollar was valued at about 80 Russian rubles, roughly the same exchange rate before Russia invaded Ukraine on Feb. 24.  The Western sanctions, the most scorching in modern history, initially devastated the Russian currency, but it bounced back. How did that happen? 

Well, Ms Elvira Nabiullina, Head of Russia’s Central Bank, made it happen.. Nabiullina was born in Ufa, Bashkir ASSR, on 29 October 1963 to a Tatar family and graduated from the Moscow State University in 1986. She was in the 2007 Yale World Fellows Programme and Vladimir Putin appointed her Minister of Economic Development and Trade, 2007.

It was In 2014, that she first proved she was of a Central Banking special breed; stopping the Russian Ruble from collapsing because of a soaring inflation after barely a year in office. There was a collapse in oil prices—caused by a jump in U.S. production and the refusal of Saudi Arabia to cut production, denting Russia’s oil revenue—and economic sanctions imposed after Russia annexed Crimea.

  “In 2015, she was named Central Bank Governor of the Year by Euromoney magazine. Three years later, Christine Lagarde, then the head of the International Monetary Fund, claimed that Ms. Nabiullina could make “central banking sing, according to a magazine.”

Now she has shown that “the girl is good;’’ guiding the extraordinary rebound of Russia’s currency, which lost a quarter of its value within days of the Feb. 24 invasion of Ukraine. That time the world was mocking Russia (a popular Nigerian newspaper columnist harmed his prestige when he predicted the death of the Russian economy and of Russia as a country. 

Pheeeeeeeeeew; one day I will remind him of that ill-informed prediction) saying its currency would become worthless in a matter of weeks, but the Central Bank Governor “took aggressive measures to stop large sums of money from leaving the country,arresting a panic in markets and halting a potential run on the banking system,” said Elina Ribakova, the deputy chief economist of the Institute of International Finance, an industry group in Washington. 

She added: “Her reappointment has symbolic value.” While Nigeria has been dollar-dependent, disgracing itself by behaving like the 51st state of America instead of a sovereign country, Ms. Nabiullina set about squeezing as much of U.S. Dollars from the economy as possible, so that companies and banks would be less vulnerable if Washington further restricted access to the country’s use of dollars. “She also shifted the bank’s reserves, which grew to be worth more than $600 billion, toward gold, the euro and the Chinese renminbi.

During her tenure, the share of dollars in the reserves fell to about 11 percent, from more than 40 percent. She also moved Russia’s foreign reserves of $600 billion (from the dollar share of 40 to about 11%), toward gold, the euro and the Chinese renminbi. Renminbi is the official currency of the People’s Republic of China, and means “people’s currency” in Mandarin. A yuan is a unit of the currency. 

A popular analogy draws from the British pound sterling vs. the pound: renminbi is the name of China’s currency, just as sterling is the currency of Great Britain. A unit of renminbi is a yuan, just as the pound is the basic unit of sterling. 

Other protections against sanctions included an alternative to SWIFT, the global banking messaging system, developed in recent years. And the bank changed the payments infrastructure to process credit card transactions in the country so even the exit of Visa and Mastercard would have minimal effect,” gushed a US magazine.

CBS, a giant American news outlet titled a story, in its “money-watch” section on June 28, 2022: “Russia’s ruble is the strongest currency in the world this year.” Then it explained: “Even as Russia marks a historic default on its debt, the nation’s currency is gaining strength. The ruble hit a new high against the dollar this week, continuing its streak as the best-performing currency in the world this year. 

Three months after the ruble’s value fell to less than a U.S. penny because of economic sanctions, Russia’s currency has mounted a stunning turnaround. The ruble has jumped 45% against the dollar since January, with one dollar worth 53.45 rubles as of Tuesday.

“It’s an unusual situation,” said Jeffrey Frankel, professor of capital formation and growth at the Harvard Kennedy School. Yes, it is unusual simply because a remarkable person is steering the activities of Russia’s Central Bank, and because many dyed in wool Occidentalists, as most Nigerians are, hold the wrong notion that the USA is almighty and so never gave the Russian economy a chance of surviving the West’s sanctions.

It is true that after Russia invaded Ukraine on February 24, already high oil and natural gas prices rose even further. “Commodity prices are currently sky-high, and even though there is a drop in the volume of Russian exports due to embargoes and sanctioning, the increase in commodity prices more than compensates for these drops,” Tatiana Orlova, lead emerging markets economist at Oxford Economics, told CBS Money-Watch recently.

Yet, it is also true that since the end of March, many foreign buyers pay for energy in rubles as Russia demanded, pushing up the currency’s value. In the first four months of the year, Russia’s account surplus — the difference between exports and imports—rose to a record $96 billion. Then there is a ban on foreign holders of Russian stock and bonds taking dividend payments out of the country.  “That used to be quite a significant source of outflows for currency from Russia—now that channel is closed,” Orlova said.

Also, Russian exporters are now required to convert half of their excess revenues into rubles, creating demand for the currency. The result is that while the world excoriates Russia, it praises her Central Bank head; “She’s been the very model of a modern central banker,” said Richard Portes, a professor of economics at London Business School who has shared panel stages with Ms. Nabiullina at conferences.

Subscribe for latest Videos


Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.