Just like Garri, the rate at which the dollar appreciates over our naira especially in the world market, makes it so alarming for every parties involved. Even in a local marketplace, it is no news that the prices of goods and services have sky-rocketed and according to these local traders, “the dollar is now expensive” is the response they give each time people ask. Is it this dollar that equals to a naira at some point in the 90s? How pathetic to know that in our present day Nigeria, this same one dollar is above 500 naira not to even mention other international currencies.
The reason for this isn’t far-fetched – most times Nigeria prefer import to produce, and export; and as the country’s population increases the demand for imported goods increased. Due to the unbalance of import to exported goods, the demand for dollar is always on the rise, which generally causes a continued depreciation of the naira. Depreciation is steadfast at the parallel market and the gap between naira’s value at the parallel and official market widens easily due to this imbalance. To checkmate this, the CBN has devalued the currency a number of times, only for the same thing to happen years later.
Also, the demand for goods is ever present and needs to be met. If there isn’t infrastructure to support poultries, toothpick-making factories, rice farms, and so on, the need to export these produce will always be on the rise. This will cause the naira to continue depreciating against the dollar. The attitude of Nigerians to locally made goods is appalling. There is a truism that a lot of Nigerians prefer imported goods to those made locally. We prefer to buy things made in foreign lands, which can easily be produced locally. It’s generally assumed that Made-in-Nigeria goods are fake and of substandard quality, quite saddening.
In an effort to further ease economic gridlock, the Central Bank of Nigeria late last year released new foreign exchange policy actions. For School and Medical Fees while understanding the challenges face by parents, guardians and sponsors, the CBN appropriated about $20 million dollars weekly for commercial banks to cater for school fees payment and others, but in order to check banks’ excesses, commercial banks were mandated to pay directly to the institution specified by the customer so that as many customers as possible get the foreign exchange they genuinely demand.
In order to further ensure that travelers access forex at a more competitive exchange rate and ease their burden, the CBN has directed commercial banks around the country to open forex retail outlets at major airports. This will not just ease traveler’s burden but significantly reduce parallel market patronage and gradually close the gap between the official rate and black market’s rate, since commercial banks are instructed not to sell above 20 percent of the official interbank market rate.
Well, it is rather impressive that the Central Bank of Nigeria is giving tangible responses which are actually long overdue. People make policies but it is highly imperative that these people are capable and knowledgeable enough to make effective policies. At this point, if the apex bank team run out of ideas on how to regulate the economy, it is rather advisable to leave the stage while the ovation is loudest. The present economic team, as led by the Acting President, Prof. Osinbajo has been taking drastic measures to address the economic challenges. Our hope is that their efforts turn into success as soon as possible because Nigerians are losing their patience by the day.
Conclusively, until Nigeria starts producing standard goods and Nigerians have a different mentality, the demand for dollars will always be on the high demand curve and the naira will keep depreciating. Local production of goods and services in mass and at affordable cost will ensure em-masse consumption by the citizenry. Nigeria needs to be stable economically, politically and socially for the currency to stabilize. Clashes between rival tribes, political instability and lack of definite economic direction will ultimately make the country look unstable to outsiders, disrupting foreign investors and investments. At this point in time, it is highly important for the President Buhari-led administration to sincerely undertake the issue of diversification of the economy; we cannot continue to run a mono-economic system.