Naira’s unprecedented fall

THE Nigerian currency has plummeted further against the United States dollar across both the official and unofficial markets again and again in recent days. The situation has provoked speculations that it will go down to as low as N2500 to the US dollar. According to data published on the Financial Dealers Market Quotations (FMDQ) website, the local currency closed at N1,598.54/$1 at the official market on Monday, February 19, as against N1,537.96 recorded in the market in the preceding Friday. The rate represents a 3.94 percent depreciation from the previous market rate the preceding Friday. The naira experienced an intraday high of N1,100/$1 and a dip of N1,712.00 before the market settled at N1,598.54 at the close of business that Monday. On Monday February 26, the Central Bank of Nigeria (CBN) put the exchange rate at N1,662 to the US dollar. In the parallel market, the naira slid further with one dollar exchanging for N1,900 in Abuja and Kano, and N1,800 in Lagos, while the British Pound was exchanged for N2,250. This week, the CBN began selling $20,000 weekly to each Bureau De Change operator at N1,301 per dollar.

Nigeria’s economic situation continues to worsen as its legal tender, the naira, tumbles at the parallel market in spite of the Federal Government’s clampdown on foreign exchange market speculators. The economy continues to inch closer and closer to collapse. We call on the CBN to resume the monthly Monetary Policy Committee (MPC) meeting. The Tinubu government must do everything in its power to ensure that the CBN leaves no stone unturned to arrest the slide of the naira. This may require the reversal of polices that the government has taken but which have obviously impacted negatively on the economy. The government must swallow its pride and take the right measures.

Precipitate measures such as the Economic and Financial Crimes Commission (EFCC), Customs Service and the police raiding BDC hubs in Abuja, Port-Harcourt, Lagos, Ibadan and Kano have not yielded the expected outcome. Bureau de Change operators function within the confines of the available dollars in relation to demand. Sealing malls and stores to stop the rising prices of goods will also not work because traders set prices within available supply and demand for goods. Although some operators were arrested, the naira continues to slide badly. The CBN keeps churning out circulars accusing banks or BDCs of sabotage to no avail. The government must come clean on the true situation with its policy measures which had provoked the situation in the first place.

It is clear that the naira has fared worse since the removal of subsidy and the floating of the currency in the foreign exchange market. These policy measures must be reconsidered. Before the merger of the exchange rates, the naira was N460.70 to the US$1. The fallout from the poor management of the currency has resulted in the scarcity of foreign exchange. This has led to the exit of many multinationals from the country as they are unable to get the necessary foreign exchange to procure inputs to continue production at feasible levels. The purchasing power of Nigerians has been simultaneously eroded by the devaluation of the naira and galloping inflation. The prices of essential food items have skyrocketed creating a crisis of hunger and want. These trends which may continue in the months ahead are harbingers of social unrest.

For decades, consecutive governments had expressed commitment to diversifying the economy without significant achievements. Efforts were invested in the energy sector, yet electric power supply has remained far from adequate or reliable. The president promised that the Port Harcourt refinery would resume production last December but it did not. If the Dangote Refinery and others had started production as envisaged, they would have reduced the forex being spent on imported petroleum products. The government needs to ensure that these refineries and modular refineries start working to give the currency a breathing space.  A few days ago, President Bola Tinubu set up a tripartite economic advisory committee comprising the Federal Government, sub-nationals and the private sector to provide “additional efforts” in stabilising the economy and ensuring the “best economic future” for Nigerians. This and an economic crack team should have been in place to consider the twin policies of subsidy removal and floating of the naira before they were announced and implemented.

We hope the president and his team have learnt some lessons from the misstep of announcing policy measures without the debate and consensus of stakeholders regarding the consequences and supporting measures. The president must urgently set up an economic management team to provide the groundwork for the direction of the economy. The country can only breathe when the environment is supportive of the real sector, including small and medium enterprises and manufacturing.  We call on government officials to refrain from importing luxury items like expensive cars and aircraft. Nigeria needs to produce and export commodities in order to generate foreign earnings. The government must avoid waste and demonstrate frugality and accountability. The Buhari government spent about N10 trillion on the Anchor Borrowers Scheme alone without any discernible impact. There is hunger in the land because of both scarcity of goods and declining purchasing power of the people.

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A country’s currency is as strong as the level of production within the country and where a country does not focus on and prioritise production, the currency would continue to fall in value. We expect the government to face the hard realities of the current decline in production and productivity in the economy and act urgently and responsibly through leadership and incentives to imbue a new value on production into the economy. This is the more realistic way to stem the continuing slide in the value of the naira instead of persisting in fire-brigade acts that would not help in any real, substantial and sustainable way.