Recently, the Nigerian Naira fell to N604 per dollar at the parallel market, which was formerly N565 at the beginning of the year. Information obtained from the Nigerian Bureau De Change supervision has attributed the fall of the Naira to the increase in the demand for dollars by Nigerian politicians, for the upcoming 2023 elections.
The result of the Naira crash in the black market has therefore widened the gap between the official investors and exporters window and the black market. BDC operators in the country have attributed the naira crash to the shortage of Forex supply, while demand has risen in recent weeks.
In a recent interview, the President Association of Bureau De Change Operators of Nigeria, Alhaji Aminu Gwadebe has attributed the fall of the Naira to the fact that Nigeria is import-dependent which has made the nation gain inflows of dollars while losing on the outflows of Naira.
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He further stated that the country practices a monoculture economy, I.e one-product economy which has seen production activities very low. Despite multiple interventions by the Central Bank Of Nigeria to restore the Naira, it still fell in the first quarter of 2022.
The CBN did not fail to attest to the fact that one major cause of the falling Naira is the nation’s dependence on imports. Over-dependence on imports is no doubt one of the strong reasons for the currency’s depreciation.
In a bid to safeguard the naira, the Central Bank of Nigeria had to implement some restrictions, ranging from prohibiting the selling of Dollars to BDCs, to prohibiting the broadcast of black market rates on Aboki FX.
In February 2022, the CBN also released instructions that outline that it will facilitate payment of N65 for every US Dollar repatriated and sold at the investor’s and exporters’ window. It seems the Naira is not yet done crashing against the Dollar, as experts have predicted that Nigeria’s Naira will further depreciate, while the Gross Domestic Product and GDP will grow further by 3%.
Due to how messed up the Naira is against the Dollar, most Nigerians have lost confidence in the nation’s currency, which has seen an increasing amount of them invest in dollar-denominated assets to diversify their portfolios and minimize their exposure to the naira depreciation.
This act is capable of extremely increasing demands for Forex in the foreign exchange market, thereby leading to further devaluation of the Naira. It is disheartening to see that the Naira is becoming a mess, which has seen it lose its value.
Over-dependence on importation is no doubt one major factor that is causing the steady fall of the naira. The government has failed woefully to develop various sectors in the country that will manufacture locally made in Nigeria goods to reduce the nation’s over-dependence on foreign goods, which is seriously affecting not just the naira, but also the economy.
I do not want to be a harbinger of bad news, but the Naira is likely to keep depreciating, as there are no visible plans or measures put in place by the government to limit the importation of foreign goods. The government must understand that no Nation thrives on constant dependence on imported goods.
Also, the country’s over-dependence on oil is not helping the economy, as they have failed to diversify. The country is so rich in agriculture, yet the sector has been relegated to the back end which has greatly affected the nation’s export.
All the parameters in the country to make the currency strong are currently negative. It’s high time the government put in measures and take the necessary steps to ensure that the Naira regains its value because the economy of the country is currently in jeopardy.