Naira Devaluation: Its Effects On Nigerians: This may not be what Nigerians bargained for but with the devaluation of the naira, consumers are now paying more for goods and services. BUKOLA OGUNSINA writes on the hard-biting economic trend Rike’s smiling face turned to that of dismay and utter shock as she stared down at the inflated, bogus exchange rate of the naira to the dollar. Breaking into a cold sweat, she slowly mulled over what to do. Money had been sent to her in Nigeria to procure some goods for her family and for business. But with the devalued naira, she was facing many challenges. Running her hands through her hair, she sighed loudly as her customer’s words rang in her head as a reminder, “Please, hurry up and buy the items oh! They might go out of stock!” but this was more like, “Hurry up and buy the items oh! The naira will soon be devalued!” The money Rike had in her bank account would be further reduced because of spiked conversion rates. She was at a loss on what to do as the money she had was not enough to buy all the items on her list. The depreciation of the naira has surely become a hobby horse in the minds of Nigerians these past few days. Perhaps it is at this point that many Nigerians wish they had a crystal ball that they could look into to see the future. Nothing prepared the most populous black nation, whose rising economy is import based, for what was and is still coming, with regards to the naira’s slump and subsequent downward spiral, with many looking on helplessly, unsure of what the end result would be. Curious about what average Nigerians thought on this subject-the devastating hit on the naira- LEADERSHIP Weekend sampled opinions and the result showed that a lot believed it was due to the fact that the United States of America decided to stop its procurement of Nigeria’s crude oil as a result of establishing its own reserve, while others suggested it was because Nigeria as a country had so many unresolved problems that our biggest oil buyers are retreating pensively before they got caught up in a web of insecurity that has nothing to do with them, which could threaten their businesses. Other Nigerians simply put it down to the fact that the economic depression this year is so bad that even the superpowers cannot afford our oil. Nigeria was the first to fully stop exporting crude oil to the United States of America in July of 2014. Closer to the truth is the latter; the United States of America, Nigeria’s largest oil customers are suffering a depression and have drilled their way to establishing oil reserves that they believe can sustain them for a long time to come, thanks to the shale revolution. Domestic production in the US went on the increase as a result of new technologies such as horizontal drilling and hydraulic fracturing. This is one of the reasons the naira has been devalued. But what the average Nigerian is battling to understand is what this essentially means. Nigeria’s economy thrives on importation, which makes the naira susceptible to international changes in monetary value. The surprising fact as shown by investigations conducted by LEADERSHIP Weekend is that not many average Nigerians know what the devaluation of the naira means or its adverse effect on the economy. “What did you say? I don’t understand, what does that mean? Please explain it to me,” Alaye, a taxi driver asked, when asked if he knew what the devaluation of the naira meant. Another woman who was asked how the now devalued naira would affect her life simply looked at our reporter and shook her head saying, “I do not know what it means.” Perhaps, this situation would affect traders more, especially traders who import items from abroad to sell in shops. “It affected everything. The cost price has increased. Tops that usually go for N1,500 are now sold for N1,800 and the ones that go for N1,800 are now N2,000. I do not know if it’s because of the festive period,” Vera, a business woman who owns a boutique/shop at Utako market stated. It’s not just private businesses that are affected; currently the devaluation of the naira has also stretched its depressing tentacles into some federal government ministries as payment is pending on some staff salaries, which usually would have been sorted by now. “Although it doesn’t affect the price in the market, except imported goods; it does not really affect the local produced items we buy in the market, but in due season it will affect all things. At the moment the federal government is having difficulty paying its staff, and so there is not enough money in circulation. Some states are not being paid, so it will affect things. The only solution is for Nigeria to decimate their currency. When they decimate the currency, the value of naira to dollar will be equated,” Sunny Aiyi told LEADERSHIP weekend. “We want this money to use to celebrate the festive season, but we have not yet been paid,” a civil servant who requested anonymity lamented. The former economic adviser to ex-president of Nigeria, Olusegun Obasanjo, Professor Ode Ojowo, told LEADERSHIP Weekend that one of the vital ways to prevent further fall of the naira is to “Prevent importation of foreign items and encourage Nigerians to consume locally,” adding that it was not entirely a monetary problem, but a production fiscal problem. The Central Bank of Nigeria (CBN) devalued the national currency, the naira to N168 to one US dollar. This became inevitable because of the reduction in the federal government’s revenue from oil production and sales. The CBN governor, Godwin Emiefele in a speech said, “The committee wishes to reiterate that the bank remains committed to a stable exchange rate within the limits of available resources and would continue to maintain sufficiently strong level of external reserves to meet its short term obligations and other regular balance of payment commitments.” As some financial experts suggest that the naira might be further devalued to prevent a free-fall, Nigerians hold their breath, uncertain of what 2015 holds for them. Original link Read More goo.gl/Q3aFAC (y) ✍comment ☏share
Posted on: Sat, 03 Jan 2015 01:45:49 +0000
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