As the Naira, Nigeria’s legal tender and the national currency continues its relentless decline against the US Dollar, the impact on the Nigerian economy is becoming increasingly severe. The recent surge in the exchange rate has sent shockwaves through the country, with devastating consequences for the average Nigerian citizen. With the exchange rate hitting unprecedented levels, the cost of living has soared, plunging millions of Nigerians deeper into poverty. In this report, Gom Mirian who spoke to some Nigerians writes on how the significant weakening of the naira is making it increasingly unaffordable for ordinary citizens to purchase basic necessities and conduct business transactions.
Rising Naira to Dollar Exchange Rate: A Plunge into Poverty:
The Nigerian economy is facing a severe crisis as the Naira continues to depreciate against the US Dollar, leading to a decline in the purchasing power of Nigerians and plunging the country into deeper poverty. The exchange rate currently stands at an alarming rate of N1,465 Naira to Dollar ratio as of Wednesday 7th January 2024, exacerbating the already dire economic situation in the country.
The rapid decline of the Naira against the Dollar has been a cause for concern, with the exchange rate plummeting from N700 to a dollar in May last year to N1550 to a dollar early last week.
This situation has been attributed to recent government policies, including the unification of the country’s exchange rate and the elimination of fuel subsidies in May by President Bola Tinubu.
These policies have led to high inflation rates, lower disposable income for consumers, and decreased business productivity, seems to be a purely suicide mission for a country that ties everything to fuel price and the price of dollars, removing the two at the same time was bound to create excruciating hardship for Nigerians and a spike in crime rates in some parts of the country.
Similarly, in Nigeria, you can’t leave things to market forces. It’s a place where everyone wants to take advantage of his fellow citizens. There is absolutely no price control.
Also, it seems it has defied all solutions so far. The government is also at a crossroads at the moment. All of a sudden, we have armchair experts on social media who have proffered their expert opinions on how to save the naira.
The Impact on Retailers and Business Operators:
The impact of the rising exchange rate is felt across various sectors, with retailers and business operators struggling to cope with the soaring costs of importing goods and raw materials. This has led to a significant increase in the prices of imported products and locally manufactured goods, making them unaffordable for the average Nigerian consumer.
Ms. Aisha Bello, a local store owner at the Gwarinpa market in Abuja, expressed her concerns, stating, “The increasing exchange rate has severely affected my ability to stock quality products.
“The cost of importing goods has become unbearable, so I’m left with no choice but to increase prices,” she said. “Unfortunately, my loyal customers cannot afford these inflated prices, and my business is suffering.”
Akin Wale, a computer dealer at the Computer Village in Abuja, spoke to our correspondent via phone and expressed that it is no longer realistic for him to have a fixed price for his goods.
He explained that his business depends solely on the reactions of the dollar to the naira exchange rate.
He stated, “Due to the fluctuation in the naira to the dollar exchange rate, I cannot confidently state the exact cost of my goods for tomorrow. I have to check the daily exchange rate to determine my price for the day. This approach is not unique to me; many other businesses in my industry do the same. Since our goods are imported, we have no choice but to adjust our prices according to the exchange rate after each sale.”
Similarly, at the Jabi partaker market in Abuja, a buyer who preferred to be called Hajiya shared her frustration about the daily price increases in the market.
She said, “It’s quite unfortunate how things have drastically changed here. This market was known for its affordability regarding foreign fairly used home appliances.
“Unfortunately, I have brought my microwave for repair here for the third time, and I still haven’t found what I am looking for. In the past, I could have easily opted for another appliance, but now I cannot afford the average price of a foreign fairly used one here,” she said. “Every day you visit this market, the prices have increased compared to what they were the day before.”
A Bureau De Change Operator’s Perspective:
Bureau de change operators, responsible for facilitating currency exchange, have also been deeply impacted by the soaring Naira to Dollar exchange rate.
Mr. Abdul Ahmed, a bureau de change operator in Abuja, shed light on their struggle, stating, “The continuous depreciation of the Naira against the Dollar has made it exceedingly difficult for us to meet demand.
He continued, “Customers are desperately seeking Dollars, but we are unable to provide sufficient supply due to increasing costs. This situation creates a vicious cycle of higher rates, leaving the common Nigerian at a disadvantage.”
According to Ahmed, the demand for dollars has surged in recent months, driven by a combination of factors including dwindling foreign reserves and a lack of confidence in the Nigerian economy.
Government Interventions:
Recognising the severity of the situation, the Nigerian government has taken steps to address the rising exchange rate and mitigate its impact on the economy and citizens. One of the key interventions has been the implementation of foreign exchange control measures to stabilize the currency market.
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun had on October 24 said that the country was expecting about $10bn inflows in the nearest term, which would help to clear foreign exchange backlog and stabilise the naira to boost the country’s foreign exchange liquidity.
However, recently the Central Bank of Nigeria’s governor, Olayemi Cardoso blamed the rise in naira on Nigerian students schooling abroad and health tourism.
Speaking before the lawmakers at the House of Representatives, he further attributed the rise in the Naira to factors such as speculative forex demand, inadequate forex due to low remittance of crude oil earnings to the CBN, increased capital outflows, and excess liquidity from fiscal activities.
He said: “Between 201O and 2020, foreign education expenses amounted to a substantial $28.65bn, per the CBN’S publicly available Balance of Payments Statistics.
“Similarly, medical treatment abroad incurred around $11.01bn in costs during the same period. Within the same period, Personal Travel Allowances accounted for a total of $58.7bn.
“Cumulatively, Nigerians spent about $98bn on foreign trips, medical tourism and overseas education, a figure the CBN governor said was more than the total foreign exchange reserves of the central bank.”
Speaking on the government’s intervention, Dr Alfa Kamba, a financial economist, commented, “While these measures are commendable, their impact may take time to materialize. The government needs to bridge the gap between short-term inflationary pressures and long-term stability.
“More comprehensive policies and collaborations are required to resolve the deep-rooted issues underlying the increasing exchange rate.”
The rising Naira to Dollar exchange rate has plunged Nigeria into deeper poverty, with retailers, business operators, and consumers bearing the brunt of the economic repercussions. While the government’s interventions aimed at stabilizing the exchange rate and promoting local production are steps in the right direction, addressing these issues requires comprehensive policies, collaborations, and efforts to build a resilient economy that can withstand external shocks, thereby lifting Nigerians out of poverty.
I appreciate you sharing this blog post. Thanks Again. Cool.