Naira’s Perilous Plunge is hurting everyone, especially Nigerians who have chosen to brace the jarring jaws of the Economy by doing business within its perilous walls.
It is completely mental to think that the Naira would depreciate by more than 20 percent in less than 9 months. Who fuelled this economic disaster and would the current leadership do anything to salvage it?
The value of the Naira today has undergone a dramatic decline against the dollar, pushing the masses into a relentless struggle to cope with the economic aftershocks that ensued following the removal of petrol subsidies.
The months spanning from February to the present have been a rollercoaster for the Naira, taking it from approximately 410 Naira to a dollar in February 2023 to a staggering 1,250 Naira to a dollar in the parallel market today.
The consequences are far-reaching, prompting both individuals and businesses to turn to the black market for their dollar needs. In this report, we delve into the state of the Naira, investigating the road to rebuilding Nigeria’s economy.
Pressure point
Naira’s depreciation can be attributed to a complex web of factors, including global economic conditions, shifts in oil prices, and changes in investor sentiment towards emerging markets. The demand for foreign currency has surged, causing an uptick in its cost, both in official and unofficial markets. Simultaneously, the Naira has seen significant devaluation, with speculators predicting further losses on the black market due to thin trading.
On June 14, 2023, the Central Bank of Nigeria (CBN) took a pivotal step by instructing Deposit Money Banks (DMBs) to remove the rate cap on the Nigerian Naira at the Investors’ and Exporters’ Window of the foreign exchange market. In essence, this move signifies a transition to a floating exchange rate, where market forces determine the currency’s value rather than a fixed rate set by the CBN.
The government’s objectives behind this shift include managing Exchange Rate Volatility, enhancing Export Competitiveness, attracting Foreign Investment, and driving Economic Reforms.
Impact on Businesses and the Economy
The tumultuous fluctuations in the Naira-to-dollar rate have wielded significant influence on individuals, businesses, and the Nigerian economy as a whole. Businesses reliant on imported inputs or foreign currency loans have encountered amplified costs, straining their profitability and financial stability.
The exchange rate volatility has also cast a shadow on foreign direct investment and capital inflows, impacting economic growth. As the cost of imported goods escalated, inflationary pressures mounted, eroding the purchasing power of individuals and reshaping their expenditure patterns.
In conversations with small business owners, recent immigrants, and families responsible for financial support, a common thread emerges – their shared experiences and challenges while grappling with Naira-to-Dollar exchange rate fluctuations and economic uncertainties.
Eseoghene Onogbo, an entrepreneur specializing in denim products, explained that the new exchange has impacted her business negatively and she is utterly frustrated at what the future holds for her. She says:
“I can’t believe I am still doing this business.”
Another entrepreneur, Mrs. Peace Evans, involved in the import of raw cosmetic materials and the export of finished products, who highlights the hardships faced when purchasing goods from overseas, fervently hopes for a more stable dollar and product prices.
In the immigration sector, travel agent, Abel Orezimena points out that while prices have not seen significant changes, the exchange rate fluctuations are reshaping the landscape for those contemplating relocation from Nigeria. He maintains that costs will no longer be what they were in previous years.
Also, a prospective immigrant, Maurice Okorie, discloses how his plans for relocation have been postponed due to budget constraints. The shifting exchange rate has thrown his financial calculations into disarray.
What next?
In the midst of these economic disruptions, the federal government has hinted at measures to rekindle hope among Nigerians regarding the Naira’s future.
Speaking at the 29th Nigerian Economic Summit in Abuja, President Bola Tinubu assured citizens and investors of an ongoing plan to bolster the country’s foreign exchange liquidity.
Furthermore, Minister of Finance and Coordinating Minister of the Economy, Wale Edun, announced that the country anticipates around $10 billion in inflows in the near term. This influx is expected to alleviate foreign exchange bottlenecks and stabilize the Naira.
The plight of the Naira in Nigeria has undoubtedly taken a toll on numerous businesses. Nevertheless, it is imperative for policymakers, businesses, and individuals to vigilantly monitor exchange rate dynamics and devise strategies to mitigate the potential adverse effects on financial needs, investment decisions, and overall economic stability.
The journey to rebuilding Nigeria’s economic resilience is a challenging one, but it is one that must be undertaken with vigilance and determination.
– Dorcas Izah ( Writer and editor )
