Naira slump fuels concerns Nigerian quick fixes failing

President Bola Ahmed Tinubu of Nigeria addresses the 78th session of the United Nations General Assembly (UNGA) at UN headquarters on September 19, 2023, in New York City. PHOTO | AFP

Nigerian President Bola Tinubu came to power with much fanfare around his economic policies. But five months later, there is increasing worry those policies are failing to arrest the economic harshness felt by ordinary folk.

One such worry is reflected in the continual fall of the Naira, the local currency. In May, it oscillated between N320 and N400 to the US dollar.

Today, it has dropped to between N890 and N930, officially, and between N1,000 and N1,2000 at the black market rates.

This has upended expectations because Tinubu had harmonised exchange rates in a quick-fix approach to tame hoarding and mounting import bills.

Tinubu had also rolled out new fiscal measures to curb the annual inflation. The rate has continued to escalate, now at 24.08 percent as of July 2023 data, the highest since 1999 when the nation returned to democracy.

There had been multiple exchange rates which experts blamed for the poor performance of the Naira and held accountable for inflation during the administration of President Muhammadu Buhari.

President Tinubu’s monetary reforms followed his sacking of the Central Bank governor and the new management of the Central Bank of Nigeria (CBN) adopted a clean float foreign exchange administration.

But things haven’t worked, or change has taken longer to reflect. Now labour movements are demanding pay raises or a slowdown on statutory obligations to ease the blow.

Workers belonging to more than 43 national unions under the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) have resolved to shut down the economy and declared a nationwide strike beginning Monday.

Mr Joe Ajaero, the President of NLC, said last week the government is being deceptive and that it has not been responsive to the worker’s demands to be cushioned.

Tinubu began by tinkering of the Monetary Interest Rate, currently at 25 percent, which he described as “currently too high, anti-people, anti-business and we have to work on it.’’

Then he replaced CBN Governor, Mr Godwin Emefiele, with Mr Yemi Cardoso, a financial technocrat and installed four new deputy governors to drive the reforms.

CBN’s Director of Financial Markets, Dr Angela Sere-Ejembi, immediately directed changes to operations in the Nigerian Foreign Exchange (FX) market and abolished multiple exchange rate windows. She then collapsed them into the business-based Investors and Exporters (I&E) window.

“All segments are now collapsed into the Investors and Exporters (I&E) window. Applications for medicals, school fees, BTA/PTA, and SMEs would continue to be processed through deposit money banks,” Dr Sere-Ejembi said in a message to authorised dealers of forex.

The new monetary policy and the removal of petrol subsidy received the blessings of the International Monetary Fund (IMF), international agencies and the business elite but not ordinary Nigerians who have endured economic harshness.

Senator Adams Oshiomhole, ex-National Chairman of the ruling All Progressives Congress (APC), denounced the policies.

“The globe may be clapping for the government, but Nigerians are the ones that are supposed to clap,’’ he cautioned.

The government must intervene to stabilise the Naira instead of relying on market forces, he argued.

“Interest rate cannot be at 20 percent or 25 percent and expect the manufacturing sector that requires long-term gestation period to grow,” Oshiomhole added.

Nigerians in the streets of Abuja may not understand the economic policy but the fall of the Naira has been a daily pain.

“It is sad that the school fees of my son in the UK has gone up by more than 500 percent with the new exchange rate,” said Mr Alex Durojaiye who has to buy dollars before sending the money to pay school fees.

“We bought a dollar at the rate of N1,060 on September 27 against N380 we bought in March 2023. I do not have enough Naira to buy dollars to pay for my child’s fees. It is sad.’’

Mr Abdul Hussein, a civil servant, said: “You can imagine the impact of the high cost of dollar on goods and services.’’

“Aside the more than 300 percent increase in pump price of petrol, the drastic fall of the Naira have combined to heave a heavy toll on the people. The government needs to do something very fast to assuage frail nerves across the country, ” Hussein warned.

Mr Ayokunle Olubunmi, the CEO of Agusto & Co, a financial rating institution, however, argues the policy shift wasn’t always going to bring immediate change.

“The main challenge we have in the forex market is illiquidity or inadequate supply,” Olubunmi argued. Others say opening up the forex markets will tame the runaway shortages.

The CEO of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, for example, argues that the liberalisation of the foreign exchange market will unlock the huge potential for investment, jobs and capital flows.