Godwin Emefiele, CBN Governor

By FELIX OLOYEDE    

When Mr. Abiodun Oladapo, Chairman, Comtrade Group, first travelled abroad in 1987, he exchanged a dollar for N3.00, but if he was to embark on the trip today, he would have to cough out N386 to get a dollar. This is the sour tale of the Nigerian currency. 

The Naira has shed59,285 per cent of its value from N0.65 against the dollar in 1973 when it was introduced to replace the West African Currency Board (WACB) issued-Pound, to record high of N386/$ at the Investors’ & Exporters’ foreign exchange window in August 2020. 

And in the last one year alone, it has lost 24.55 per cent of its value to N381 against the dollar at the interbank segment of the forex market as of August 7. It was even weaker at the parallel market, where it has depreciated to four years low of N475/$ on Friday.

Market observers believe the naira will continue to lose value if the economic managers do not evolve creative and far-reaching measures to grow the Nigerian economy.

According to data obtained from en.wikipedia.org, the Nigerian currency maintained a strong position at the official forex window until 1986 when it was devalued to N2.02/$1 from N0.89/$1 the previous year. Within a decade it had weakened to N21.89/$ in 1996 and by 2006 the Naira was exchanging a dollar for N128.50–N131.80. 

In the decade that followed a dollar was sold for as high as N489 at the parallel market. During the President Muhammed Buhari administration, the Central Bank of Nigeria (CBN) has devalued the Naira from N196/$ in 2015 to N381/$ at the interbank segment of the forex market as it claimed to be unifying the country’s exchange rates. 

Many who saw the economic potential of the country when it became independent in 1960 and christened it the giant of Africa, are wondering where did wrong that an economic giant has suddenly become a midget within 60 years. But this is not far-fetched. 

The downward spiral of the Nigerian economy that has adversely impacted the strength of the Naira started with the country’s overreliance on oil as its main source of foreign exchange, following its discovery in commercial quantity in 1956. The discovery of oil led to the disappearance of cocoa plantations which were the source of foreign currencies for the western part of the country. 

The palm oil plantations in the East and the famous groundnut pyramid in Northern Nigeria have since been taken over by residential houses, even though the country is still struggling with an acute shortage of houses. 

Professor Leo Ukpong, a professor of Financial Economics at the University of Uyo, Akwa Ibom state, told Business Hallmark that Nigeria’s overreliance on oil as its exchange rate earner, and the volatility of oil price at the international market, has been one of the major reasons the naira has remained weak. 

He noted that whenever oil price, which accounts for over 90 per cent of the country’s foreign exchange, plunges at the international market, the Nigerian economy suffers, and the naira comes under severe pressure. “When oil price drops, it means we are not going to get much revenue,” Prof. Ukpong explained. 

Mr Oladapo, who is also Chairman, SME Trade Group, Lagos Chamber of Commerce and Industry (LCCI), noted that the value of any country’s currency is dependent on its level of productivity. He argued that Nigeria is not taking adequate of the area where it has a competitive edge, which is agricultural production. 

“For instance, a tonne of maize is about N100,000, but unfortunately the government is not encouraging its production by not supporting the production of fertilizer. If the naira must improve, the government must encourage real production,” he said.

The continued depreciation of the Naira is also traceable to the protracted stay of the military in government, ruling the country for almost four decades. They managed the economy abysmally and opened Nigerian borders to imported goods. Nigerians’ appetite for foreign goods and the hostile operating environment led to the death of companies like Dunlop Nigeria; Leyland in Ibadan; Volkswagen Nigeria in Lagos; Anambra Motor Manufacturing Company (ANAMMCO) in Enugu; Arewa Textile Mill in Kaduna, etc. 

They abandoned their local football clubs like Shooting Stars, Rangers, Kano Pillars, etc., which were their darling teams until the 1990s, for Arsenal, Chelsea, Real Madrid, Manchester United, etc. all in Europe. This has not meant well for the naira. 

Nigeria is said to be the 5th largest consumer of Japanese products in the world, but it has no assembling plant for any of these products. Though former President Goodluck Jonathan had in 2013 introduced the Nigerian Automobile Policy aimed at reviving the country automobile industry, not much has been done on it afterwards as the sector remains in comatose. 

Nigerian roads continued to be flooded with cars, especially used ones, imported with the country’s scarce forex. The current Senate has spent N5.5 billion to import its official cars, which could have been manufactured by Volkswagen Nigeria, Peugeot Automobile Nigeria or Innoson Motors and save the country of the forex spent on importing these cars. 

“Our loss of manufacturing capability is the main thing that has reduced our ability to keep the naira strong,” asserted Prof. Ukpong. 

Corruption and mismanagement of the country’s resources have also been identified as a major cause of the weakness of the naira. The Economist magazine last year published that over $582 billion has been stolen from Nigeria in the past 60 years of her independence. More than $2 billion ferried abroad by late General Sanni Abacha alone has been recovered.

 Several corruption cases have also been exposed since the return of democratic governments in the country in 1999. The Centre for Health, Equity and Justice (CEHEJ) disclosed that over N11 trillion has been lost to corruption in the power sector alone since 1999. These monies could have been put to productive use that could have helped strengthen the local currency. 

Dr Bongo Adi, associate professor at the Lagos Business School, told Business Hallmark that the efforts being made by the CBN to strengthen the naira will continue to be hampered by corruption if not tackled headlong. He advised that corruption in government and the private sector must be addressed to stimulate economic growth and in turn give birth to a strong naira. 

“If we fix our economic problems by firstly producing what we eat, the naira will appreciate. When we can manage our economy such that when oil price does down, we can produce what we consume that will make the naira stable,” Prof. Ukpong advocated. He also reasoned that should the government address the issue of political uncertainty in the country, it would also go a long way in firming up the local currency. 

He also pointed out the need to cut down the country spiralling debt, which currently stands at $79.5 billion as of March 31, 2020. “The amount of the country’s loan shows that it may not be able to pay its loan in the future and that may affect the naira negatively,” he added.