The travails of Nigeria’s national currency continue to batter the economy and dismay both domestic and international experts and development partners. A new report from the global consultancy Andersen raises fresh fears over the forlorn trajectory of the naira and highlights the urgency of a salvage mission. Sadly, the two drivers of fiscal and monetary policy—the President, Major General Muhammadu Buhari (retd.), and the Governor of the Central Bank of Nigeria, Godwin Emefiele—have not only failed to find effective solutions but have become part of the problem. Under their watch, every economic indicator is heading south: inflation, unemployment, poverty and debt are at record levels, while rising inflation and scarcity force the naira to buckle under escalating demand pressure.
Last week the naira traded at N750 per dollar on the parallel market, a clear N290 premium over the official CBN rate of N460 per dollar. Experts project further worsening of naira‑dollar exchange‑rate fluctuations, especially after the CBN’s monumental bungling of the naira redesign. Ostensibly aimed at strengthening the economy, reducing cash‑management costs, promoting financial inclusion and mopping up currency outside the formal system, the scarcity of the new notes has spread misery and nearly crippled the economy. Andersen projects that the parallel‑market rate could reach N900 to $1 in 2023 if economic initiatives are not substantially generated. Its report, “Nigeria’s 2023 Economic Outlook,” presented in Lagos, notes that in 2022 the naira was relatively more stable in the official market than in the parallel market, widening the premium between the two windows due to heightened demand pressure spurred by FX illiquidity.
Nigeria’s economy is heavily import‑driven and hinges on the swing of the naira against the dollar in both official and parallel markets. Currency speculators, middlemen, bureaux de change operators and the foreign‑trade deficit further expose the naira to vulnerability. The situation is exacerbated by the overwhelming role of the CBN as the major source of foreign exchange, while the organised private sector generates meagre export earnings. Although non‑oil exports rose by 40 percent in 2022, the Nigeria Export Promotion Council reports that petroleum accounted for $41.37 billion of the $46.86 billion total export value in 2021, leaving only $5.49 billion in non‑oil earnings. Consequently, most available dollars remain with the CBN.
The CBN’s attempts to save the naira—including the “Naira 4 Dollar” scheme for diaspora remittances, adoption of the NAFEX rate as the benchmark, bans on forex sales to bureaux de change (BDCs), the e‑form A for online forex, Eurodollar borrowing, IMF Special Drawing Rights, e‑naira, a Pan‑African payment and settlement system, and a N65 incentive for each $1 repatriated and sold at the IEFX window—have not halted the naira’s persistent slide. Defending the naira has largely meant frequent draw‑downs from external reserves, costing between $8 billion and $10 billion in 2002, according to Lagos‑based consultancy Financial Derivatives. In 2021 the naira fell slightly in the parallel market after the CBN announced a stoppage of direct forex sales to BDCs. Emefiele described BDCs as “renegade, greedy and recalcitrant,” noting that their numbers grew from 74 in 2005 to over 5,500 today. Yet operational realities show that BDCs still obtain ample forex through back‑door channels, while corrupt officials enjoy unhindered access, creating billionaires from mere speculation on the naira‑dollar exchange. Money launderers, treasury looters, kidnappers‑for‑ransom and terrorists operate with impunity, and the wide gap between official and parallel rates fuels a thriving arbitrage market.
The CBN’s inability to effectively monitor banks, deter illegal forex deals and punish perpetrators squeezes productive sectors and businesses. Sanctions, when imposed, are insufficient; in 2021 the CBN and the Securities and Exchange Commission levied a combined N1.46 billion fine on five commercial banks for over 20 infractions, including violations of forex market and anti‑money‑laundering regulations. The fines failed to curb the flourishing forex racketeering.
To save the naira, President Buhari and the CBN must stimulate domestic productive activities, support SMEs and promote exports to boost external reserves and stabilise the exchange rate. Reserves fell by $317 million in February, according to the CBN, dropping from $36.99 billion on 31 January to $36.67 billion on 27 February. In January, reserves had already reduced by $63.62 million from $37.08 billion at the end of 2022. The federal and state governments need to join forces to diversify the economy away from crude‑oil dependency, promoting investment in agriculture, mining, industry, SMEs, ICT and rural infrastructure. The CBN should adopt enduring, pragmatic monetary policies that foster economic growth, financial inclusion and reduced cash‑based transactions.
Diaspora remittance inflows are crucial for boosting economic activity and external reserves. The World Bank reports that Nigerians abroad remitted $65.34 billion over three years—$24.31 billion in 2018, $23.81 billion in 2019 and $17.21 billion in 2020—rising to $19.5 billion in 2021 and $20.9 billion in 2022. The CBN should therefore improve policies that harness this non‑oil forex source to strengthen the current‑account balance and stabilise the exchange rate. Although the naira redesign was partly intended to mop up the N2.7 trillion outside the banks, its barbarous implementation is now hurting the economy. The CBN must urgently re‑strategise.
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