Save the Naira

There is an urgent need for the Nigerian government to take a holistic review of the decision to float the nation’s currency, the naira. The liberalisation of the foreign exchange market has not yielded any positive result. If anything, it has become a threat to the economy and the well-being of Nigerians.  

It is indeed becoming harder for the government to justify its hasty reform in the financial sector and this is partly because the impact of other measures and the absence of expected palliatives have led to severe consequences for Nigerians.

The last two months have been very excruciating for Nigerians, as they bear the burden of rising costs of virtually all items. First, the sudden and uncoordinated removal of petrol subsidy destabilised the entire macroeconomic environment as it sent prices upward. This was followed almost immediately by the liberalisation of the exchange rate systems.

On the exchange rate front, Nigerians have seen the value of the local currency nosedive without restraint since June 14, when the CBN began the unification process through its “willing buyer, willing seller” principle for the sale of foreign currency at the official window. Since that day, the local currency’s value per dollar has fallen from about N463.8 to N781.34  on the official Investors and Exporters window, and from about N755 to a current rate of about N955 at the parallel market. 

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Within this same period, the price of petrol more than tripled compared with its price a year ago. According to the National Bureau of Statistics, the average price of petrol in June this year was higher by 210.30 per cent than its level in the corresponding month last year. Consequently, transporters have hiked their fares, in some cases by over 200 per cent.  These are not just mere figures; they are real economic statistics that tell the stories of human suffering that has been visited upon Nigerians within such a short time, as a result of these policies.

Many Nigerians now find it challenging to feed themselves well because the value of their incomes, which are already low, has been eroded by the rising prices, especially those of basic food items. Similarly, many companies have been forced to reduce the number of days they work, while some have sent their workers home, hoping that things will improve soon.

These negative impacts have been worsened by the inability of the government to come forth with the much-touted palliatives. Rather, it has been a case of words without much action, if any at all. This is hardly surprising because it has become clear that the idea of palliatives was indeed an afterthought and never an integral part of the policy package ab initio. In the agricultural sector, for instance, the government has spoken gleefully about its plans to make fertilisers available to farmers for use in this year’s farming season. Yet, up till now, this has been all talk but no action, and the farming season is far spent.

Because of this incongruous situation, Daily Trust hereby calls for an immediate halt to the naira policy. This is to enable the authorities to review this hastily promulgated naira exchange rate convergence policy. This call has become necessary because of the government’s failure or inability to provide complimentary palliatives on the basis of which these other measures were taken in the first place.

The efficiency or effectiveness of public policy is not just in the issuance of isolated measures, but in the ability of authorities to make a cocktail of policies that, working together, produce the optimal impact on human welfare, which in the first place is the ultimate target of such policies.

It has become evident that the government is currently struggling to articulate that mesh of policies and actions that can produce the expected salutary impact on Nigerians and their general economic well-being. So, what they are going through now is simply an unnecessary frustration rooted in policy ineffectiveness.

Nigeria’s fundamentals do not support this floating of the currency. For one thing, the foreign exchange market, like any other, is being influenced by dollar supplies, which are a function of our export earnings. Figures from the CBN indicate that Nigeria’s foreign reserves (liquid) fell to $33.14b in August 10, from $36.03b on December 31, 2022. In other words, our reserves have not been rising.

Thus, as a way out of the current conundrum or social cum economic logjam, we call for a review. We also call on the government and its agencies, including the CBN, to ensure that all concrete efforts are made to stabilise the macroeconomic environment. Let there be concerted efforts to reduce the current high price level through policy packages to reflate the economy and stimulate the real sector. This is the only way to boost the production of goods that will help to bring down the prices of goods and services.

Hopefully, this will reduce the pressure on prices of goods and services resulting from the steep depreciation of the naira. But action must be taken now to save the naira.