Emmanuel OchayiThe naira continues to losing value fast, and Nigerians are feeling the impact. Despite the Central Bank’s interventions, the currency keeps falling, pushing up prices and making life harder for millions. With the exchange rate hitting record lows, businesses struggle, and essentials continue to be more expensive.
On Monday, the naira depreciated to N1,530.15 per dollar from N1,517.24 last Friday, marking a loss of N12.91 in the official market. In the black market, it remained steady at N1,580 per dollar. Bismark Rewane, CEO of Financial Derivatives, noted that the CBN has spent $8 billion recently to defend the naira against foreign currencies. This persistent depreciation raises concerns about the currency’s future and its impact on Nigerians.
Join our WhatsApp ChannelExperts warn that without urgent action, the situation could worsen. But why is the naira slipping, and what can Nigerians do to protect their finances?
Historical Context of the Naira’s Decline
Introduced on January 1, 1973, the naira replaced the Nigerian pound at a rate of £1 to N2. Initially strong, it has faced numerous challenges over the decades. In 1986, the Second-Tier Foreign Exchange Market (SFEM) was introduced to allow market forces to determine the naira’s value, leading to its devaluation. The 1989 Anti-SAP riots highlighted public discontent with economic policies affecting the currency. More recently, the 2023 currency crisis, triggered by a cash shortage and the introduction of a digital currency, led to widespread protests and further eroded confidence in the naira.
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Current Economic Policies and Their Impact on the Naira
In recent years, the Nigerian government has implemented various policies to stabilise the naira and the economy. In 2021, the Central Bank of Nigeria (CBN) banned the sale of foreign exchange to bureau de change operators, directing all forex sales to commercial banks. The same year, Nigeria launched its digital currency, the eNaira, aiming to promote a cashless economy. However, these measures have had mixed results, with the naira experiencing significant fluctuations.
Expert Insights on the Naira’s Depreciation
Bismark Rewane, CEO of Financial Derivatives, highlighted the CBN’s substantial efforts to defend the naira: “The apex bank has spent $8 billion in recent months to stabilise the currency, yet the naira continues to depreciate.” He emphasised the need for more sustainable economic strategies.
Economist Professor Sam Aluko criticised past economic reforms, stating: “There is an alternative even to death, which is living. SAP is the kiss of death.” His sentiment reflects ongoing concerns about the effectiveness of current policies.
Consequences of a Weakening Naira on Nigerians
The naira’s decline has profound implications for Nigerians. Inflation has surged, leading to increased prices for goods and services. The cost of living crisis has been so severe that, in recent months, at least 67 people died in stampedes at charity events, underscoring the desperation among citizens.
Businesses are also feeling the strain. PZ Cussons, a major consumer goods company, reported a 39.7% drop in pre-tax profits, attributing it to the naira’s collapse. The company had to increase prices nearly 30 times to cope with the currency’s weakening.
Government Initiatives and Public Response
In an attempt to revitalise the economy, the Nigerian government has planned a $28 billion budget for 2025, based on an expected oil price of $75 per barrel and a production target of 2 million barrels per day. However, the projected exchange rate of 1,400 naira to the U.S. dollar is stronger than the current official rate, raising questions about the feasibility of these projections.
The CBN has maintained its benchmark interest rate at 27.5%, anticipating a gradual decline in inflation. Governor Olayemi Cardoso expressed optimism, stating that inflation is expected to decrease gradually, aiming for a single-digit rate.
What Nigerians Can Do Amid the Naira’s Decline
In light of the naira’s depreciation, Nigerians can adopt several strategies to mitigate its impact:
Diversify Income Streams: Engaging in multiple income-generating activities can provide financial stability.
Invest in Foreign Currencies: Holding assets in stable foreign currencies can hedge against naira depreciation.
Support Local Businesses: Purchasing locally made products can reduce reliance on imports and strengthen the domestic economy.
Financial Literacy: Educating oneself about personal finance can lead to better financial decisions.
The naira’s persistent decline presents significant challenges for Nigeria’s economy and its citizens. While government policies aim to stabilise the currency, their effectiveness remains uncertain. Nigerians, meanwhile, must adapt to these economic realities by adopting proactive financial strategies and advocating for sustainable economic reforms.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
