#News

Any hope for the naira, as it continually plummets?

By Adedotun Ajayi

Money cannot buy happiness, but it can buy security and safety for you and your loved ones. Human beings need money to pay for all the things that make life possible, such as shelter, food, healthcare bills, and a good education.

Money makes the world go round. The strength of a country, its prosperity and flourishing, are best measured by the standing of its currency.

The CBN was established on July 1, 1959, on the eve of departure of the colonialists. Nigeria created her own currency, the Nigerian Pound, N£, to replace the old West African shilling.

During the post-war era, Nigeria decided to replace the British imperial system of weights and measures with the continental metric system. In January 1973, the naira replaced the Nigerian pound at the rate of N1 to UK10 shillings.

That successful transition was managed by the finance minister of that time, Chief Obafemi Awolowo, who also coined the term “naira”. The N10 note was the highest denomination then.

After the introduction of naira in 1973, our new currency exchanged at N1 to $0.62. The Babangida military dictatorship marked a turning point. Naira suffered a massive devaluation, exchanging at $1.75 to the naira in 1986.

At the wake of the Fourth Republic in 1999, the naira was exchanging at N92.34 to $1, further falling to N132.89 in 2004. When President Goodluck Jonathan handed over power to Muhammadu Buhari in May 2015, the naira exchanged at N198.914 to $1. By 2018, it fell further to N306.08.

By May 2019, the naira exchanged at N360 to $1. In March 2021, the CBN devalued the official rate of naira to trade at the NAFEX Investor & Exporter forex window rate of N410 per dollar.

Related News  ODSG partners CHAI on sustainable healthcare

At the parallel market, the naira currently trades around N590, leading to investors preference for the market which gives them better quote.

Last week, the exchange rate between the naira and the US dollar closed at N415.190/$1, at the official Investors and Exporters window. Meanwhile, the exchange rate at the parallel market which majority of Nigerians patronize slumped to a new record on Friday to close at N585/$1.

The naira has suffered devaluation at the parallel market and many stakeholders have expressed their concern as foreign currencies’ scarcity persists. Some traders have attributed the increase in the price of certain food items to the scarcity of forex, which is affecting the cost of importation. The big question is, is there any hope for the naira?

Bunmi Olushola, economist and finance expert, said that if the naira continued to devalue, one might have to say there is no hope for it. She said the weak Naira had made exports cheaper and imports more expensive, making locally made goods more price competitive both at home and abroad. According to her, that had led to higher net exports and higher aggregate demand which may cause demand pull inflation in a fully employee economy.

Her words: “It has raised cost of production of businesses relying on imported raw materials which results in cost push inflation, now tell me how can Nigeria come back from this?”

The finance expert said: “The value of a national currency is shaped by several factors. One is debt. Although a lot of developed countries also rely on loans, the question is, how is our country managing our debt? Nigeria’s current debt stands at a staggering N45 trillion, amounting to 43 percent of GDP. This year alone, we are projected to spend more than 90 percent of government revenues on debt-servicing. High debts will further weaken the naira.”

Related News  Aiyedatiwa mourns Dr Paul Akintelure

She added, “Some are benefiting from the devaluation and they want it to continue like that. Businesses engaged in exports are huge benefactors of the declining exchange rate. Revenues from their exports officially should route through the CBN, as export proceeds. However, it is understood that some of them move a chunk of that to the black market. With gains as high as 50 percent, most of them find it hard to resist the lure of selling their hoard at the black markets, rather than at the official window.”

A bank manager in Akure who preferred to be addressed as Tony said that if managers of the Nigerian economy were to be sincere with the nation, they would agree that there was something basically wrong with the continued fall in the value of Naira. He said, “Something needs to be fixed as soon as possible.”

The seasoned banker added, “It is obvious and the warning signs are crystal clear that Nigeria’s economic managers have broken the doors to economic sanity, compelling Nigerians to tow the path of poverty. Before the free fall of Naira, which began with the introduction of the Structural Adjustment Programme (SAP) during the regime of former military president, General Ibrahim Babangida. Nigeria was never rated among the poorest nations of the world; neither did Nigerians crave the Dollar nor did 70 percent of Nigerians live on a Dollar per day.”

As a panacea for the deepening poverty, advocates like Henry Boyo have proffered a better managed currency for a stronger exchange rate of the Naira as the only solution. It is discernible that the poverty in the land correlates with the depreciation of Naira; and regrettably, the value of Naira does not correlate with the high foreign reserve.

Related News  Easter: Osun NSCDC deploys 1,520 for operations

He stated, “It is an economic contradiction; an aberration which suggests a deliberate manipulation of the currency – and by extension the economy – to keep Nigerians poor. It is until our so-called leaders stop using poverty as a weapon to control the citizens that the naira will regain its value.”

Taiwo Aluko, an accountant and businessman said this is perhaps the best time to live and work outside Nigeria, especially if your income is in dollars.

Kehinde, a Nigerian who lives abroad, revealed that she and her husband thought that rather than wait till summer, they should visit Nigeria now that the exchange rate favours them.

She said, “Sensing blood, many others exchange their dollars in little tranches, believing that today’s rate will always be cheaper than tomorrow’s. Some believe this is the best opportunity to buy land and houses, as the value of the dollar has now risen by about 70 percent against the Naira, while property prices have been somewhat depressed, I feel there are powerful people behind the black market exchange rate that don’t want solutions to this problem”

Share
Any hope for the naira, as it continually plummets?

Cocoyam planting

Leave a comment

Your email address will not be published. Required fields are marked *