Naira Reforms Transfer Wealth to Nigerian Government, Hits Others
Naira devaluation is a generally acceptable economic misnomer for a country with a distorted economic structure. Naira reforms transfer wealth to the Nigerian government and impoverish people while the private sector struggles. It is much easier to discuss naira devaluation in a country with a wider gap between the poor and the rich than to discuss currency redenomination.
At the current moment, the lowest currency in Nigeria cannot buy anything, but the monetary authority is still producing it. The hydra-headed inflation has ultimately removed the lowest naira denomination from circulation without a formal announcement to denounce its legal tender status.
The nation’s economic balance sheet gets bigger; foreign debt increased the local debt profile, and local companies with fx exposures ran into trouble. How is that a beautiful economic policy? How is what destroyed corporate balance sheets a good economic policy?
Guess what? The International Monetary Fund likes it, global ratings agencies accept it as the best the country can do, and the World Bank lauds it even when it has further widened the gap between the rich and the poor.
The federal government’s earnings from oil royalties and others ballooned from about N4tn to N12tn following the devaluation of the naira, according to PUNCH. This represents a 200 percent increase in earnings to the government through its Nigerian Upstream Petroleum Regulatory Commission.
The newspaper cited a report from the NUPRC that showed that the revenue generated by the commission rose from N4tn in 2023 to N12tn in 2024. The surge came after President Bola Tinubu’s June 2023 decision to float the naira, causing it to weaken significantly. The currency slid from N473/$ to nearly N800/$ mid-year and eventually closed 2023 at an average of N1,000 to the dollar.
In 2024, the naira depreciated further, averaging around N1,600 to the dollar. The question is: How is this good news to people who have no business collecting contracts from the Nigerian government? I know you would say government spends on infrastructure, builds road networks that millions of Nigerians have no direct use for, and…housing?
Many businesses have not overcome the pressure that came with the devaluation of the naira, and many have scaled back due to the tough economic cycle triggered by the reformer.
Truth be told, naira devaluation is not stopping imports into Nigeria; it is only restricting poor people from spending dollars. If that doesn’t beat your economic imagination, then you might have to return to economics 101.
Devaluation only provides export advantages for developed economies that desire exported products to compete favourably in the international markets. Nigeria’s exports are majorly raw, and most of the time, FX receipts are driven by hydrocarbon sales.
When last did Nigeria export textiles in large quantity overseas? Or processed cocoa products? When you hear N55 trillion budget, convert it to the US dollar equivalent and spread it on the population rate. You will realize how poor the people are. UBA Jumps by 10% to N1.625 Trillion on Sharp Rally
