Naira’s free fall has been the case in a while but do we ever care to examine the case of Naira Depreciation Against Dollar and Possible Control Measures? There could also be a positive side to the depreciation if we could strategize towards being an exporting economy rather than an importing one.
Nigerians have been thrown into severe hardship, but all is not bad with the situation of a falling Naira. Although the current Naira Depreciation Against Dollar is neither a strategic policy nor an intentional devaluation, we can still take a look at some of the benefits of Naira Depreciation Against Dollar and build a containment to the free fall or maximize the advantages of a low-valued Naira.
The current government in Nigeria seems to be caught in a reality of trials and errors. Most things happening currently are not intentional, just some out-of-control form of governance where the struggle is to sustain the system from total collapse. The lack of sustainable political ideology eliminates chances of policy continuity. This creates such a scenario of confusion.
Despite the past Buhari administration and the current Tinubu administration being of the same political party (APC), there have not been sustained policies, thereby plunging the economy into crisis. While the Buhari and even previous administrations maintained an official dollar price, in an entirely different move, the Tinubu administration maintained a floating of the Naira.
This has, more than any other administration, resulted in Naira Depreciation Against Dollar. The Naira floating policy, if well implemented, can reduce forex corruption in Nigeria, where the rich have access to FX at a subsidized rate to the detriment of the citizens. Earlier FX fixing by the federal government benefited a few wealthy individuals who had easier access to USD. We have to wait and see what the Tinubu administration’s floating of the Naira results to in the long run.
The major problem with the whole collapsing value of the Naira is that there’s no strategic motive behind the floating and the devaluation. Some countries devalue their currency to make exports easier; however, Nigeria is chiefly an importing country, and our biggest export (Crude Oil) is highly regulated. Given that we are a member of the OPEC, the volume of crude we ought to export is a bit regulated; besides, such crude oil deals are processed in dollars.
Perhaps our crude oil transaction is processed in Naira, and we are at liberty to export as much as we desire, then we could be looking at better strategic implications as the Naira Depreciation Against Dollar becomes the case. Because we are chiefly an importing economy, it becomes so complicated that our currency can no longer measure up to the dollar, which is the primary currency of most of our imports.
In the face of all these, one may ask, what if there’s a change of strategy? Can’t the Naira Depreciation Against the Dollar be deployed effectively to improve the Nigerian economy? This can be achieved through export promotion. The overpopulation of Nigeria means that Nigeria has not even been able to produce half of what the country needs, talk more of export. However, beyond finished goods, Nigeria has been exporting and can export more intellectual properties, arts and entertainment.
Nollywood products are some of Nigeria’s biggest exports. The music industry is also doing wonderfully. A lot needs to be done to attract more Forex and strengthen the Naira. Making Nigerian products more affordable will create more demand and, at the same time, find a strategic approach to the Naira’s Depreciation Against Dollar. At the moment, we are at the center of a disaster because the government seems a bit disoriented on what to do to arrest the situation of Naira’s Depreciation Against the Dollar.
While struggling to arrest the situation, the other approach could have been to take advantage of the situation by turning Nigeria from an importing economy to an exporting economy. Nigerian soil is fertile and, as such, could bring more agricultural production to contain hunger and even have more products for export.
The first challenge the current government needs to fix is hunger. The continued Naira Depreciation Against the Dollar has made more Nigerians hungry. The economy of the spiral effect is such that the current crisis impacts all sectors of Nigerian society. At the same time, Nigerians are trying to cope with the situation, but it is becoming overwhelming.
Everything is happening too quickly; one of the major culprits of the current Naira Depreciation Against Dollar crisis is the removal of the petrol subsidy. When the subsidy was removed, everything went out of control. The devastating part is that there was no clear plan by the last administration or the current administration to absorb the subsidy shock.
The impact has been symptomatic on the economy and the Nigerian Naira seems the most affected. Let’s summarize these steps to arrest the free fall of the Naira and the stabilization of the Nigerian economy. In this case, while the biggest responsibility falls on the government, the Nigerian people have roles to play.
Steps to contain the Naira Depreciation Against Dollar.
Take advantage of the Situation and implement export promotion policies: With the falling Naira value, export would be easier. The government needs to encourage local production. This must not be sophisticated finished goods but things like agricultural products, intellectual properties, movies, music, sports etc.
Set Up massive farming projects and contain hunger: Set up federal government farms in the Federal capital territory and also establish farms in other parts of the country. This will ensure the availability of food for the population. Also, individuals and organizations should be provided with vital agricultural training, support and equipment. Once hunger is eliminated, food imports will reduce. Once we are sufficient in food production and feeding our population, we can have more to export to other countries.
Support Local Industry: The support for the local industry has to be intentional patronage from both the people and the government; the locally manufactured products need to be patronized. Given where we are coming from, it is likely that at the moment, our products may not have exactly the same quality and efficiency as their imported counterparts, but improving the country demands that we appreciate our humble beginning.
Made in Nigerian cars may not measure up exactly with German-made cars at the moment, but we need to give our own room to grow and improve. This comes with intentional patronage and sincere feedback on areas needing improvement.
Government Transparency: Transparency in governance is very important in containing the current crisis in Nigeria. The people deserve to understand the true situation of things. There’s a need to carry the people along. There has been a massive use of propaganda by the government at different levels. There’s serious distrust, which may snowball into unrest if the people keep being kept in the dark.
If the people sincerely understand how terrible things are and see the sincerity in the attempts to fix the situation, they may empathize with the government and its institutions. But the promise and fail, the saying of one thing and doing the exact opposite, doesn’t seem like what the government should be doing at a time when the people’s support is most needed. Amidst the Naira Depreciation Against the Dollar crisis, the people of Nigeria need to be carried along by the government.
Well-intended Regulation: The black market is one of the places where the dollar is being traded. This creates artificial scarcity as BDC operators hoard the currency in a bid to sell higher at the black market. There’s a need for regulation of the BDC sector. Also, manipulated price fixing is one of the tactics used by some of these businesses to hike dollar prices. They hoard the currency and then sell it at exorbitant prices. Some of the causes of the current Naira Depreciation Against Dollar are as a result of artificial manipulation.
Conclusion
For now, Nigeria is an importing economy, and there’s a heavy need for the US dollar to be able to pay for all the imports. Naira Depreciation Against the Dollar is a big menace, yet it can be turned around either by building an export-priority economy or by taking steps to improve local products and local production. Regulations and policies are also going to be instrumental if we are able to achieve a more stable economy and society in Nigeria.
While the current measures can be helpful for a while, production and reaching local food sufficiency is the primary step to take to make the Naira stronger. There’s no magic to managing the Naira Depreciation Against the Dollar crisis without concrete steps to reach local sufficiency and even have more finished goods, intellectual properties and services for export. When we earn more Forex, the value of the Nigerian Naira will improve.
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