By Idu Jude
As Nigerians again enmeshed in money devaluation, targeting a single exchange rate, the public and indeed economic experts have called on the economic team of Mr. President to declare a state of emergency on the monitory to bridge the gap between the rich and poor in the country
Nigeria adopted multiple exchange-rate regimes to avoid an outright devaluation of the naira but that system sparked criticism from the International Monetary Fund and the World Bank, who claimed that the CBN has not considered the price of items in Nigeria, which reflects the current economic realities.
Recall that the Central Bank of Nigeria replaced the fixed rate of 379 nairas with a dollar used for official transactions with the more flexible Nafex, also known as the investors and exporters exchange rate, that has averaged 410.25 nairas per dollar this year.
Speaking via telephone to our correspondent in Abuja, professor of Economics and the Head of Department of Economics University of Abuja, Professor Sarah Anyanwu, remarked that the newest movie by the CBN does not reflect what goes on in the Nigerian market. She said that the policy was made to satisfy the foreign rate of exchange without considering the local price of goods, which is determined by the importation of goods.
“Well it is good to be in line with the international rate of exchange more especially importing in a single-digit yet at the other hand, the strength of naira diminishes locally and this brings hyperinflation.
The bank devalued the naira by 7.6% against the dollar as the Federal Government migrates toward a single exchange-rate system for the local currency.
“The official unification of these rates is a welcome development as the fragmented foreign-exchange market has been a cause of confusion and a source of arbitrage.
Well, I’m trying to take grasp of the whole idea, well it could be that Nigeria adopted the multiple exchange-rate regimes to avoid an outright devaluation of the naira by keeping a stronger pegged rate for official transactions and weaker exchange for non-government related transactions. This currency management system was criticized by the International Monetary Fund, and the World Bank who held back a $1.5 billion loan in a bid to push for more foreign-exchange reforms.
Now as you can see this whole idea is to certify only government official transactions not actually asking questions on how the informal market manages to survive.
A building material merchant in Kugbo Abuja Mr. Okudili Umejesi, who is currently struggling with stagnant earnings and dwindling sales, is now being squeezed by the ever-increasing prices demanded by her food suppliers, leading her to cut down on the amount she can put on her own family’s table.
Umejesi’s belt-tightening measure no doubt is being shared by millions across Africa’s most populous nation. Not long after Nigeria’s statistics agency revealed that one in three people in the continent’s largest economy were unemployed, on Thursday it announced that food inflation has accelerated at the highest pace in 15 years, compounding the misery of many households.
Mr. Yahaya Dan Asebe, a civil servant based in Abuja has a contrary view about co-operating with the present team of leaders in Nigeria more especially the ruling party. “do you think I am keen about what makes Nigeria great? Now what I am interested in now is how to get my children out of this country. This is because Nigeria is not working. How can a sane group of economists devalue a nation’s currency because of official government exchange and just to do official business with other countries? Please let me tell you one thing. Buhari and the so-called APC did it so that they will continue in their international borrowing spree. They forgot what the value of Nigeria means in the local market.
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You see all the people working with (General) Buhari have a military mentality, they only think what the President will hear not trying to explain to him certain terms, and just take a look at how the international Financial experts lampoon the idea.
I know that soon everything will skyrocket including school fees. My six children’s school fees may render my annual salary useless.
Eunice Patrick, a mother, and the civil servant saw a great future in Nigeria but not with the crop of leaders. She said, “this is the first time I see a (Mudu) of Garri sold at the rate of one thousand nairas.N1000. A Budu of beans also has risen to seven hundred N700.00. and come to talk of it is obvious that Buhari and his men have lost it. Even if it is going to happen, it should not be now that the country is experiencing an insurgency that has hampered farm produce like it used to be.
“Buhari is aware that farmers’ and herders’ problems in Nigeria have drastically reduced the number of food items in all Nigerian markets and that made the price of the available ones unaffordable. And when a lot of money is chasing a small number of items in the market, it brings inflation. Formally we buy a kilogram of meat at the rate of N700.00 one seven hundred nairas but today, a kilogram is N2,000.00 two thousand nairas.
My children no longer drink early morning tea before going to school. Sometimes I can afford sachet milo and sachet peak milk to at least make them feel something is still happening because little children never ask whether you have money on you before demanding what they eat. They do not ask if you have money before asking you to recharge the digital television and you can imagine that all these things are happening while all the television stations are going digital. There is always war in my house when the decoder is scrapped.
Segun Oluwatobi a taxi driver, is happy that the fuel price is about to be increased. According to Oluwatobi, as a taxi driver, whenever the price of petroleum products increases he increases his own price in line with the same rate. “Haba Kosi problem, Buhari thinks that he is wise to satisfy himself alone but we will still charge the passengers to pay us. if they think that we will not do our business, even if they make it 500 nairas per liter (Nadat one concern them)
On the survival of his relatives at home more especially buying from the Nigerian market, which affects everybody, Oluwatobi shrugged it off saying, “my brother, as Nigeria does today I don’t mind join those who want this country to scatter because Buhari is not worth being defended. He has disappointed all of us. If they sell a bag of rice for, million Kosi Walhalla, we will survive as long as I am still with this (kepukepu) and every morning we see what we eat until Buhari leaves that office.
Meanwhile, the CBN Governor has tried to explain the rationale behind the devaluation, while addressing journalists Tuesday. He said, “we found out that we were no longer dealing in this so-called CBN official rate for transactions, we are still running a managed-float, we are monitoring the market and seeing what is happening for us to ensure that the right things are happening for the good of the Nigerian economy.”
“The official unification of these rates is a welcome development as the fragmented foreign-exchange market has been a cause of confusion and a source of arbitrage.
The Central Bank of Nigeria replaced the fixed rate of 379 nairas to a dollar used for official transactions with the more flexible nafex, also known as the investors and exporters exchange rate, that has averaged 410.25 nairas per dollar this year.
The nafex, which acts as a spot rate, was introduced in 2017 to improve dollar liquidity and encourage inflows from foreign investors that were exiting the country following the 2016 economic crisis. The West African nation suffered even more acute hard-currency scarcity last year after the Covid-19 pandemic led to a plunge in oil prices, forcing it to devalue the local unit twice.
While crude contributes less than 10% to the country’s gross domestic product, it accounts for nearly all foreign-exchange earnings and half of the government revenue”
Emefiele said that the key thing for the market is to now allow for more flexibility in the pricing of the investors and exporters window rate in order to completely narrow the spread between the Nafex and the parallel market.
He also said that “the latest central bank move is expected to improve confidence in policymaking, but recovery in portfolio inflows will not be immediate as investors wait for more dollar liquidity”
