Naira remains a means of transaction, but the local currency has been adjusting poorly for the past six years– BUSINESS EDITOR, NIYI JACOBS however, writes that Nigerians are worry that the currency is dragging them close to poverty each day even as the New Year begins.
Few investment experts, wealth managers would today ask important clients to keep naira assets. The local currency is losing steam, CBN actually devalued to N435 per dollar in December.
Nigerians love the United States dollar more. It is not only stable but also a reliable currency to keep wealth. Dear naira, please, what’s your problem? You have lost so much value in a country where demand for wage adjustment hardly happens in a jiffy.
Civil Servants go to war each time there is a need to adjust to economic reality for marginal adjustment to a monthly salary – when ‘take home’ takes nobody home!
In the private sector, you must have a superman intelligence quotient (IQ) level to re-negotiate salary in two to three years.
Really and truly, Naira has lost the store of value feature and the inflation rate is putting additional pressure on my wallet! If Naira has to speak, it would probably say it is Godwin Emefiele.
Mr. Emefiele would probably have to defend his expertise with a counterargument: “Oh Naira, I am not responsible for your so much trouble in the FX Markets.
“It is disequilibrium position between the amount of dollar that flows into the economy and sum required for Nigerians to make imports payments”.
Finding solutions would help Naira survive the onslaught of a stronger United States dollar. The thing is, Nigeria must have this discussion if Naira would retain its store of value feature.
As the monetary authority, the CBN has a responsibility to keep naira strong but the apex bank has failed. Data has no emotions, Naira has lost so much blood in the FX markets since 2016- The exchange rate rising from N197 to N435 could be a move toward Zimbabwe dollar!
Already, currencies traders in the parallel FX market could comfortably quote N570-N580 for a United States dollar. Even now, banks charge N480 for online payment –
On the contrary, the broad gap between the official and parallel naira rates may have instinctively prompted the remark that Nigeria’s economy will only become competitive if the naira is devalued and brought closer to the street market rate.
Today, the naira exchange rate from the official CBN exchange platform is N570-N580,while at the unofficial platform it is being exchanged N480=$1.
This has exposed a mass of citizens to deepening poverty, unemployment and high cost of living, crime detrimental to development. Still with the news in that our foreign reserve is hitting $42billion, one is not sure if the increase could be sustained before the end of the year.
From the above state of affairs, the 2022 Appropriation Bill of Economic Growth and Sustainability totaling N16.39 trillion was presented to the National Assembly by President Muhammadu Buhari.
The budget is predicated on a conservative oil price benchmark of $57 per barrel. The daily oil production estimate of 1.88 million barrels (inclusive of Condensates of 300,000 to 400,000 barrels per day). Meanwhile, exchange rate is N410.15 per US Dollar; and projected GDP growth rate of 4.2 percent and 13 percent inflation rate. The allocations to MDAs still followed the usual ritual lead with defence and security taking N2, 41trillion (15%), infrastructure N1.45trillion (8.9%), education N1.29 trillion (7.9?%), health N820 billion (5%) and social development and poverty elimination N863 billion (5.3%).
In the wisdom of the government, above sectoral allocation were guided by the strategic objectives of the National Development Plan of 2021 to 2025, which are: diversifying the economy, with robust MSME growth; investing in critical infrastructure; strengthening security and ensuring good governance; enabling a vibrant, educated and healthy populace; reducing poverty; and minimizing regional, economic and social disparities. Appealing, the summary of the budget suggests recurrent expenditure stands at N6.83 trillion (41.7 %), whereas capital expenditure N5.35trillion (37.72%).
Admittedly, the 2022 budget is impressive though N16.39 trillion may not be enough for the enormous human and development challenges confronting us today.
We must take into cognizance the naira exchange rates N480=$1, to the 2022 budget oil revenue N3.16 trillion, particularly, if the 2021 turbulent challenges in the oil sector that led to shortfall and poor performance of oil revenue relative to the budget projection replicates. For instance, in 2020 from 2.07mbpd in Q1 down to 1.61mbpd 2021.a further decline occurred Q3 to 1.27mbpd lower than 1.38 mbpd recorded in July of 2021.
Another issue is the net inflow of foreign exchange rates from Q1 and Q2 of 2021, with overall balance of payments reading negative and the external reserves decline due to heavy forex demand pressures and weak forex inflow Critically, external sector aggregates of the Nigerian economy matters a lot, with our continued heavy dependence on the oil sector for export earnings and external reserves accumulation. We must however acknowledge the fact that to achieve a better budget performance the heavy dependence of the country on the oil sector for foreign exchange and government revenues creates instability in the naira exchange rate.
Decisively shifting away from defective economic and budget management is to consider reviving, revamping and restoring the productive sectors to achieve higher competence output and viable manufacturing exports. That would in the long run tidy up our nation’s disbursement of scarce foreign exchange for import of finished goods, especially, where many of these imported items could be produced locally and reduce pressures on the naira.
The projected non-oil taxes of N2.13 trillion is very diminutive compared to the reality if the governments mulls on the productive sector.
Consequently, root causes of deliberate market disparity against the naira must be addressed with stringent measures by CBN in checking round–tripping of forex among Deposits Money Banks (DMBs) to the parallel market.
It should tackle excess demands for foreign exchange, that substantial part of it aimed at transferring funds out of the country that promote capital flights, illegal financial outflow and money laundering.