To create an enabling environment for the needed urgent change, the exchange rate between the Nigerian naira and the United States dollars consistently captures attention and affects the daily lives of Nigerians. The naira has faced depreciation against the dollar in recent years, with the latter now exceeding N1,000. This has raised concerns for both citizens and the government.
In recent years, the naira has been challenged, undergoing a series of depreciations against the US dollar. The gravity of this situation has triggered concerns about its aftermath on the Nigerian economy, capturing the collective attention of citizens, the government, investors, and international bodies
A weaker naira erodes the country’s economic stability and can hinder foreign investment. This can result in reduced foreign capital inflow, hampering economic growth and development, and potentially undermining confidence in the Nigerian market for both local and foreign investors.
The weakening naira also erodes the purchasing power of the average citizen, leading to higher prices for imported goods like food, fuel and medical supplies. This economic strain is now impacting household budgets, making it more difficult for people to cover their basic expenses.
The situation we face today is not one that should be taken lightly. It is imperative to recognise that a mere conventional approach will not suffice in addressing the complexities of our economic landscape. The ascent of the US dollar and the concurrent inflationary pressures require a detailed, multifaceted response from our country’s leadership.
This article provides counsel to President Bola Ahmed Tinubu, governor of the Central Bank of Nigeria (CBN), Olayemi Michael Cardoso, and pertinent authorities.
It underscores that the economic recovery efforts may face limitations unless the persistent appreciation of the US dollar and the ensuing price escalations, which impact individuals’ purchasing power, are addressed.
In the quest to prevent the depreciation of the naira, it is imperative that we embark on the critical task of demystifying the US dollar. This process involves comprehensive efforts to understand, manage and reduce the overwhelming reliance on the dollar in our economic landscape.
We must recognise that the world economy is ever evolving, and as such, our response to these challenges must be dynamic and adaptive. While we cannot fully control global factors that influence exchange rates and commodity prices, we have the power to implement effective domestic measures to mitigate their adverse effects.
In addressing the rise of the US dollar in foreign economies, other countries have taken notable steps. The launch of the euro in 1999 played a pivotal role as it now accounts for 20 per cent of global foreign exchange reserves. Additionally, the Asian Currency Unit emerged in the early 21st century, comprising 13 currencies from East Asian nations.
These developments, coupled with the success of economic regionalisation, were influenced by western-led geopolitics and led to shift in the dominance of the US dollar in global finance.
It is, therefore, incumbent upon us to consider a range of policy options, including diversification of our economy, fostering an environment conducive to local industries, and ensuring efficient and sustainable resource management. These steps will not only help stabilise the exchange rate but also bolster the resilience of our economy in the face of external pressures.
It is imperative to note that different Nigerian presidents had faced the challenge of controlling the US dollar’s rise at various points in the country’s history.
A notable example was during the tenure of former President Muhammadu Buhari, who took office in 2015. His administration introduced several policies and measures to try to stabilise the exchange rate and reduce the naira’s depreciation against the US dollar. These efforts included capital controls, limiting access to foreign exchange and promoting domestic production to reduce the country’s dependence on imported goods. However, the success of these policies and their impact on the exchange rate fluctuated over time.
The World Bank’s guidance on reducing the dominance of the US dollar in the Nigerian economy is to encourage and support measures that promote the use of the naira and other local currencies in various economic transactions.
By substituting the dollar with the naira or other local currencies for substantial transactions, Nigeria can bolster its own currency and diminish its reliance on the dollar. This shift has the potential to enhance economic stability, grant better control over monetary policies and instil greater trust in the local currency. It represents a significant stride towards attaining financial independence and nurturing a stronger economy.
Osilama E.Osilama is a trained estate surveyor and valuer, He is a renowned estate developer.