When, How Will Naira Gets Its Grooves Back?
The Nigerian local currency, the Naira, may be passing a road to Zimbabwe already -not so quick- there is an opportunity to get it right – either by reform or devaluation. The former is preferable but who has the balls to reform Nigeria’s economy and by extension, foreign currency management?
In the foreign exchange markets, the exchange rate has been running amok. Naira has been beaten down mercilessly across the FX markets; with some knockout punches from the overweight US dollar.
Yet, the monetary policy could not help but be sorry with sustained market intervention. It has not worked. Nigerians still don’t like their local currency.
Nigerian local currency official rate was kobo away from N4625 to a United States dollar at Investors’ and Exporters’ foreign exchange window. Six years after the Central Bank of Nigeria opened the window to balance the demand and supply side with periodical intervention.
The exchange rate wasn’t this bad earlier in the days when Nigeria was a country when the country was known for productive activities. Yesterday, the Nigerian Autonomous Foreign Exchange rate was N465 – a distance from investment bankers’ fair value estimate of N500.
In the earlier years, Nigerians needed not so much to have a dollar in their pockets – until it becomes easier to become a billionaire through politics than through owning industries and engaging in economic activities.
Now, I wake up to see that I am poorer than the day before because the naira has been devalued overnight and the inflation rate is biting, not to mention that the street inflation figure is way ahead of the official number.
Up till 1988, Nigerians need less than N1 to obtain a dollar. But since then, the Nigerian naira has been on a turbulent ride to the extent that you almost require N800 to obtain a United States dollar in recent times.
What happened? At the end of an era, to be precise, many countries dig deeper than Nigerian leaders’ initial thought.
In the beginning, Nigerian local currency was a king in the foreign exchange market, basically backed by agricultural produce and of course much needed crude oil as the global economy advance into industrialisation.
But while Nigerian leaders dwell on their oasis, others were thinking about how to reposition and compete favourably. It didn’t take so much time, they catch up, and race ahead speedily but Nigeria catch down.
It is disturbing there is no significant investment in Nigeria with oil windfall. Instead, Roll Royce and private jets for the few scatters, litter the streets.
America, China, and the United Kingdom among other economic capitalists of the world produce a lot while Nigeria eats a lot of imported stuff. They even squander away Nigerians’ commonwealth abroad.
While, by foresight, Bretton Wood repositioned the global economy, the African economy was technically tied to the United States dollar. The confession of an economic hit man, some think it’s fiction but it could be unlikely so.
Okay, in 1985, Nigerians need less than 90 kobo to have a dollar. It worsens in 1986 when the exchange rate hit N1.75 to a dollar. In 1987, the naira saw its first-ever large depreciation to N4.01.
Historical currency movements indicate that Naira faced the worst pressure between 1998 and 1999, the official exchange rate moved from N22.886 to N92.3381, according to World Bank data.
Since then, trading life has not been easy for the naira as the country wobbles, fumbles, and is troubled.
The political class and the military combine efforts to punish the Nigerian generation due to a lack of foresight. Competition for a position without competence kills the future of the Nigerian economy.
It has not survived and is unlikely to survive by the way the Nigerian electorate cast votes. In a couple of years to come, Nigeria could rank among the most indebted nations.
Total public debt has raced above N46 trillion – an official figure which excludes other borrowings.
Invariably, the future has been mortgaged. Africa is the property of the creditors. It is hardly seen that African country is owed to one another – Unlikely so because African countries like and prefer the greenback.
The amount of US dollars or houses they own abroad makes African leaders, and their people happy, especially Nigerians. Africa is heavily indebted to foreign interests. The question is, what are African countries borrowing money to do?
Some African countries are owing more than their entire gross domestic product to bilateral and multilateral lenders. And China is having commercial fun in the region –a strategic incursion into the continent due to a lack of strategic resources management and coordination.
Many African leaders are simply enemies of their respective nations: gullible! I am still asking: When would Naira get its grooves back?
Foreign interests believe, despite its worrisome state in the FX market, that the naira is overvalued and they want the local currency devalued so they bring more dollars into the nation.
It is what it is with Nigeria, producing less and consuming more – a community of people with a taste for everything foreign. #When, How Will Naira Gets Its Grooves Back? Naira Steadies as Banks Issue Update on FX Purchase
