In 1980, a foreigner visiting Nigeria could only get N50,500 in exchange for US$100,000. Forty years later, one would almost require the service of a bullion van to convey the Naira equivalent of the same quantity of Dollars. Naira, the currency of the biggest economy in Africa, has lost approximately a whopping 84,000 percent of its value against the Dollar in the past four decades.
Today, the United States Dollar is worth close to 500 times the value of the Naira, which has continued to tumble. The Central Bank of Nigeria (CBN) has frittered billions of Dollars from the external reserves in recent years to keep the local currency firmer, an effort the late Henry Boyo, a famous economist, had described as “self-affliction”. Yet, the Naira seems to have mastered its self-destructive art, tumbling against all major currencies at will.
In terms of market size, population and productive capacity, Nigeria sits atop Africa’s pecking order, which is the reason it is often taken as the gateway to the continent’s economy. With a gross domestic product (GDP) of $450 billion in 2019, it has clearly defined its position as the biggest economy in Africa, pushing its rival South Africa to a distant second place. Yet, while the Naira exchange rate to the Dollar is N470 or N360 to a Dollar, depending on the version of the rate you use, the Rand-Dollar exchange rate is less than 20.
Notwithstanding the un-computed massive underground economy, the country controls nearly one-fifth of Africa’s economy. Sadly, its currency is the weeping child of the continent’s economy. It is not only the second weakest among the currencies of the top eight economies of the continent – Nigeria, South Africa, Egypt, Algeria, Morocco, Kenya, Angola and Ethiopia – but also distantly inferior in a pairwise comparison.
The strength of a currency is symbolic of its country’s relevance and strength. Riding on the confidence in its currency, China is lobbying the rest of Asia to expand the acceptance of Yuan in a bid to bolster its economic clout and reduce the United States’ overbearing posturing. Decades after the emergence of the Euro, the Pound Sterling has maintained its sound testimony of the United Kingdom’s undisputed economic superiority in the region. The historical ‘cold war’ over the Pound and Euro also bears testimony to the importance the British ruling class attaches to the currency.
And the Dollar’s global acceptance, as well, is telling of the United States’ ascendancy. Today, the Dollar is America’s iconic emblem in strength and significance. Even China, who was previously embroiled in politics of deliberate currency devaluation to retain and expand its global market share, seems to have realised the strategic importance of a stronger Yuan.
Emefiele has recently advocated some form of protectionism as a necessary option to stabilising the Naira and rev up economic growth. He has insisted, for instance, that the border closure is good for Nigeria, advising that the neighbouring countries, especially the Republic of Benin, should be made to sign certain conditions before reopening.
At the 2019 Banker’s Dinner, Emefiele charged bank chiefs (whose lack of interest in any proposal that is unrelated to importation and oil/gas has contributed to stifling the real sector) to “encourage Nigerians to consume goods that can be produced in Nigeria, knowing well that a time will come when we may not have the foreign exchange to aid such activities if we continue to rely on earnings from the export of crude oil.”
Last year alone, the country expended $1.3 billion in foreign exchange on the importation of cereals. The figure does not capture the undeclared and smuggled tonnes that come into the country through the land borders weekly.
Interestingly, made-in-Nigeria item is neither here nor there. What qualifies for this label is loose in the manner it is applied today. Examine a belt made by a Lagos fashion maker, for instance. Is it the buckle that is sourced from Nigeria or the leather? Nigerians would rather eat their leathers as pomo and travel thousands of miles to China to get leather to service the local shoemakers. Switch to a piece of jacket. Which among the components – the fabric, thread or the buttons – is produced in Nigeria? Interrogate almost all the sectors of the economy in like manner.
According to Jide Akintunde, Managing Director of Financial Nigeria, it is bad that the Naira is among the weakest currencies in Africa but worse that it carries the challenge along with unbearable interest and debilitating inflation rate.
According to him, to address Nigeria’s macroeconomic woes, the political factors that drive economic inefficiency – large government, bloated and unskilled civil service, corruption and poor project decision – must necessarily be drastically reduced. Akintunde is not the first, second or third analyst to recommend a drastic reduction to the historical fiscal inefficiencies as a way to raising the performance bar. Public officials themselves have also identified this as one of the very actions that must be taken. But the ‘when’ and ‘how’ remain the unanswered questions.
The Naira has benefitted from the entrenched inefficient macroeconomic management that has become the Nigerian style, and unfortunately accepted as a norm. Connected to the mismanagement, according to Godwin Owoh, a professor of economics, are politicisation of the monetary authority, absence of inflation targeting, compromised financial reporting and poorly-conceptualised monetary frameworks.
Owoh, who described the Naira, as the worst-managed currency in Africa, regretted that the Central Bank seems to have become “too powerful to be probed” and called to order.
Perhaps, when the country gets to a stage when most Nigerians no longer lose sleep over overseas tuition fees, as observed by Prof. Kingsley Moghalu in a recent interview with The Guardian, they will realise that a weaker local currency is better than stronger one. But till the country expands its economic base; grows its industrial sector and reduces its heavy reliance on importation, a Naira that tumbles daily is a headache Nigerians are too hard-pressed to bear now.