As the value of the Nigerian Naira continues to decrease in both parallel and official markets, concerns have been raised about the circumstances leading to its fall and what strategies to employ in strengthening the Nigerian currency.
Recall that in February, the Nigerian naira fell to record lows on both the official and unofficial markets on Monday, while stocks posted their biggest one-day fall in more than a year, as jittery investors sold off local assets. After extending losses, the currency dropped to 1,712 naira per dollar in late trades on the official market and to around the same level on the unofficial market. These concerns led President Tinubu to declare war on Forex speculators as a measure to stem the crisis in the foreign exchange (FX) market, despite this, the naira continues to get devalued.
Just recently, president Tinubu, urged Nigerians to Patronize homemade goods to strengthen the value of the naira, adding that the government is focusing on patronizing and purchasing made-in-Nigeria goods.
“One, His Excellency, President Bola Ahmed Tinubu wants to communicate very clearly to our people, that there has never been a more important time in our history to actively agree together. That we will patronize and purchase made-in-Nigeria products across all value chains across all sectors.” a part of the statement released by the Special Adviser to the President on Media and Publicity, Chief Ajuri Ngelale, during a briefing of State House correspondents on the ongoing plans to strengthen the naira.
In reaction to this, Samuel Oyekanmi, a financial analyst, while noting that the demand and supply for naira have led to further devaluation of the currency, emphasized that patronizing Nigerian-made goods can help strengthen the naira.
“ If you want to go and buy rice in the market and you see what determines that is the number of rice in the market and the number of people willing to buy it, so if you have just one bag and you’re the only seller in the whole of Nigeria and hundred people wants to buy it and if it naturally cost twenty thousand naira, you won’t sell it that price, you will want to increase it. In the case of naira what affects it is the demand and supply for naira.
“If you want to import any goods into the country, you will have to take your naira to drop it with the CBN and exchange it for dollars and import because the item you are importing and the person supplying you from outside the country is not going to accept naira, he’s going to accept dollar anywhere. You have to look for the dollar and as long as you keep on exchanging your local currency for dollars, it will continue to gain over the naira but what happens if we try to move our attention back to not importing but buying what we produce in our country. we can increase the value of our currency by buying locally-made goods. Let people start the purchase of locally made goods and you will see in just a matter of years you will see the currency value will begin to appreciate significantly ” he noted.
He, however, opined that the lack of sufficient goods in Nigeria has posed a challenge for this to be achieved. He noted that Nigeria’s current production levels are inadequate to meet the demands of its citizens, resulting in reliance on foreign goods and contributing to the devaluation of the naira.
“ Nigeria is a county of two hundred million people and we cannot even feed ourselves. What we are producing is not enough to cater to the needs of people, so if I know I’m not going to get it, if it’s not available, why am I going to stress myself to look for Nigerian-made goods? I would rather go get what is available outside” he said
He emphasized that another factor is the high cost of goods produced in Nigeria.
“So if I have two options and I feel like I will always go for the cheaper one, I don’t care where it’s made from right? So most of the time, the things that are brought into the country are cheaper than what is produced in the country, that’s because it’s not our fault, it’s not as if we are just inflating the figures, and the cost of production of these goods. Inflation in Nigeria is about thirty percent and in other countries neighboring countries it is not as high as it is in Nigeria
“So what that means is that when you bring some of these things into the country, it is cheaper. it is easier to produce elsewhere than to produce in Nigeria. So if I know that I can’t afford it I would rather go for the imported ones. Also, some of these imported goods are actually of better quality, so if I know that I want what I’m buying to be durable, why will I care about where it’s made from?” he noted.
What Is Limiting Production Of Goods?
Samuel Oyekanmi highlighted that production in Nigeria has been limited due to insecurities in the country, as farmers cannot access their farms any longer. He called on the Ministry of Agriculture to deal with these structural challenges and provide intervention programs and incentives for farmers.
“ I mean farmers don’t want to go to the farm, people producing cotton don’t want to go to the farm and cultivate essential raw materials for these goods, so what they do is that they stay off and do other things and when they stay off like that, it reduces the production of some of these goods and people just switch to foreign goods so we need to fix it
“ When we talk about fixing that, we are not talking about the central bank diving into that. The central bank has no issue dealing with structural issues, it’s the responsibility of the physical authorities and that’s why we have the Ministry of Agriculture to step in and not the central bank, I mean the central bank has a lot of headaches to currently deal with and the core responsibility of the central bank is actually to ensure price stability and not to dive into intervention programs.
“ So that’s why we have the Ministry of Agriculture, Bank of Agriculture, Ministry of Finance, and some other ministries to deal with all of these structural challenges. So if we can fix insecurities and create an incentive for farmers to go back to farms and other areas of production. manufacturers will strive and production issues will be fixed ” he concluded.