Businesses lament as exchange rate problems erode capital

BUSINESS owners are bearing the brunt of Nigeria’s currency problems and fluctuating exchange rates, which they say are negatively impacting their capital. 

Some businessmen who spoke to The ICIR lamented they have been struggling to restock their businesses as a result of unfavourable exchange rate.

“I sell phone at the Ikeja computer village. Most of the products we sell are imported. When you get to the distributors, it’s not the prices they gave you a week ago that you will get for products. They’ll tell us that the the naira-dollar parity is affecting prices. The effect is making my business unstable,” Ikenna Okenwa, a phone dealer said.

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Okenwa feared that if the Central Bank of Nigeria (CBN) did not take urgent steps to stabilise exchange rates, many businesses would collapse.

Another trader at the Abuja GSM village, Maxwell Ofomata, told The ICIR that with the fluctuating exchange rate, it would be difficult to sustain funding of businesses.

Ofomata said, “The currency problem is eroding our business capital. I’m afraid I have exhausted my back-up for the year and may risk my capital if this continues. It is a very serious concern for us. I want the government to look into this problem.”

He stressed that the daily fluctuation of the dollar was rendering market price determination difficult because of the wide gap between the parallel price and official rates.

With the country lacking export power to generate adequate foreign exchange (forex), crude oil has for decades been the mainstay for the economy, and the CBN has been using dollars earned from crude sales to prop up the naira.

But as dollars began to dry up over a a sharp drop in forex earnings as volume in oil production dropped and huge theft of crude oil persisted, the naira started taking a deep plunge.

To compound the problem, government’s plan to redesign the naira has been forcing market sentiments up and pushing naira-dollar parity wider in the parallel market.

On the official market side, the local currency depreciated by 0.13 per cent to close at N446.10 on Tuesday, November 8, according to details on FMDQ OTC Securities Exchange, a platform that oversees official foreign exchange trading in Nigeria.

At the parallel market, from which most businesses buy their forex needs, the naira today exchanged for N835 to an American dollar.

Most business players in the Nigerian economic space have always had to resort to the unofficial trading window to source for their forex needs as a result of short supply by official source.

This development is not good for business, most industry analysts say.

“The redesign is causing economic dislocation, and you could see the currency problems are widening as a result,” said Muda Yusuf, a former Director-General of the Lagos Chamber of Commerce and Industry (LCCI).



    The free fall of the naira has rendered the currency one of the world’s worst-performing currencies, after Ghana’s cedi, which is down nearly 55 per cent this year, and the Sri Lankan rupee. Its peers include Sierra Leone’s leone, which is down 36 per cent, and the Egyptian pound, which has lost 35 per cent, according to Bloomberg.

    Africa’s largest economy operates a tightly controlled official rate, but it is in the parallel market that the exchange rate of the local currency is largely determined by the level of demand for the dollar.

    Businesses and ordinary Nigerians are feeling the pain.

    The ICIR findings have further shown that the naira volatility is the single largest contributor to the surge in inflation, which is ravaging the economy, taking prices of everything spiralling to the top and causing considerable concern ahead of the year-end festivities.

    Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

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