More distress for Nigeria’s poor as naira hits new low

IT is more misery for poor Nigerians as naira hits a new low, crashing to N530/$ on Friday in the Lagos parallel market as against N526/$ on Tuesday.

The British pound exchanged for N722/£ on Friday, a weak position from N715/£ recorded on  Tuesday.

The naira was not spared against the euro, as it weakened to N620/€ on Friday morning, from N612/€ on Tuesday evening.

For an import-dependent economy like Nigeria, the weakening of the local currency raises cost of living for citizens, with attendant impact on inflation, especially food prices.


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This puts Nigeria’s the majority poor in greater distress as they struggle to afford basic household items due to high prices.

About 105 million Nigerians, amounting to 51 per cent of the population, are extremely poor, according to the World Poverty Clock. 

Food inflation was 21.03 per cent in July 2021 and consumer price index stood at 17.38 per cent in the same month.

In November 2014, naira exchanged for N155 to a dollar. But it was devalued to N197 in November 2015.

It has since risen by 108 per cent in the official market and 169 per cent in the parallel market.

The Central Bank of Nigeria (CB N) has banned bureau de change (BDCs) for malpractices in the foreign exchange (FX) market, but their sanction has not stopped a free-fall of the naira.

The CBN website advertised the official dollar rate at N410.37 on Friday, but it is no more flying as only very few firms can access the market.

Nigeria imports virtually everything, including toothpick and tomatoes, as its manufacturing sector continues to struggle.

Abuja-based Jane Nwanneka, who sells bottles of groundnut, said a big bottle of her product had risen from N500 to N700 in the last one year.

“There is a tendency that it will hit N800 to N900 next year. The poor man is now in a very big trouble due to the mismanagement of the country. My family are thinking of leaving Abuja for Enugu as we can no longer afford to be in this city,” she said.

Lagos-based Charles Samuel, who imports tailoring materials from China and Bangladesh, said prices of his items had risen by 20-30 per cent since January 2021 due to the weak state of the naira.

He predicted that prices would rise further in 2022 due to the uncertainty in sourcing dollars and high exchange rate costs.

Economist and Private Sector Analyst Muda Yusuf blamed the state of the FX market on the CBN’s reluctance to float it or allow it to be determined by the forces of demand and supply.

“The CBN’s current approach would continue to deepen distortions in the economy,  perpetuate round-tripping,  fuel speculation, suppress forex supply and boost underground economy,”  Yusuf told The ICIR.

“What is happening in the foreign exchange market is a  consequence of the CBN policy choice of a fixed exchange rate regime and administrative allocation of forex,” Yusuf said.

Director-General of the Manufacturers Association of Nigeria (MAN) Segun Ajayi-Kadir  said the CBN must collapse various FX windows into a single official foreign window.

“We believe that a single FX window will eliminate the excesses of middlemen, save the value of the naira and allow for available FX to be allocated productively using the official banking protocols,” he said in an e-mailed statement to The ICIR.

President of the Lagos Chamber of Commerce and Industry (LCCI) Toki Mabogunje  said in a recent statement mailed to The ICIR that unification of the FX market would improve the country’s currency management framework.

She noted that it would “also help the country to unlock external financing opportunities particularly from key multilateral institutions such as the World Bank and the IMF, who had for long advocated for a unified and flexible exchange rate system.”

She argued that unifying the FX market would also steer investor confidence in the Nigerian economy.

“Many investors are lamenting about the difficulties in accessing foreign exchange for the importation of raw materials, equipment and critical inputs for production and processing. The situation is taking a huge toll on capacity utilization, recovery and sustainability of businesses in the production sector.”

Manufacturers have argued that that if more FX is allocated to the sector, rather than traders, they can produce, export and earn FX for the economy at this critical time.

Analysts say the Nigerian economy is not earning enough FX due to slump in the oil market and low export of the non-oil sector.






     

     

    The Punch found from Nigeria’s Foreign Trade Statistics published by the National Bureau of Statistics (NBS) that Africa’s most populous nation imported goods worth N40.9 trillion but exported only N4.22 trillion value of products between January 2017 and March 2021.

    The ICIR also found that Nigeria’s non-oil exports have not exceeded $3 billion each year since 2013. Indonesia exports in 2020 were valued at $131 billion.

    The manufacturing sector is stymied by poor access to FX and funding for expansion, poor infrastructure, high energy cost, and policy flip-flops.

    Chairman of the MAN Export Group Ede Dafinone stressed the need to support non-oil exporters via the Export Expansion Grant (EEG), stating that the suspension of the scheme since 2013 was partly responsible for low dollar inflows into the Nigerian economy.

     

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