FROM the official opening in early 2013 at N155 to the US dollar and N255 to British pound, the naira now exchanging at above N172 and N272 to benchmark currencies, is hopelessly depreciating.
This is even against the background of the Central Bank of Nigeria’s effort to save the naira at all costs. Knowing the implication of allowing the Nigerian currency to exchange at market price, the CBN under Sanusi Lamido Sanusi has devised multiple regulatory strategies to ensure that naira’s value is relatively stable.
According to ENCOMIUM Weekly’s investigations, the apex bank, through the Dutch Auction System (DAS), spent all of $1.4b in just one week to protect the ailing naira. All through last year, Sanusi reportedly moved funds from the depleting foreign reserves to save one of the world’s weakest currencies. Much more than you know are also being done in this direction, from information available to us.
Only last week, the CBN came up with another policy to stabilize the value of naira. In an apparent move to bridge the increasing gap in the value of naira at the Retail Dutch Auction System (RDAS), the Bureau de Change (BDC) and parallel market, the CBN announced the removal of the limit of the amount of forex sales to BDC’s. Previously, BDCs were subjected to a limit of $250 million weekly. CBN, in a circular dated January 24, 2014, addressed to all authorized dealers and BDCs, explained that the policy was aimed at shoring up liquidity in the BDC sector of the foreign exchange market.
The document entitled, “Developments in the Foreign Exchange Market: Foreign Exchange Sales to Bureau De Change Operators by Bank” was signed by the Director, Trade and Exchange Department, CBN, Mr. Batari Musa.
According to CBN, authorized dealers are now free to sell to BDCs, subject to compliance with AML/FT Laws and regulations in the disbursement of forex. Dealer and BDCs must, however, be supported with appropriate documentation.
They are also to report their weekly transactions to CBN and relevant regulatory agencies or risk revocation of their operating licences.
Worried by the dwindling fortunes of the naira, CBN had at its first Monetary Policy Committee (MPC) meeting this year, promised it would take a critical look at the fate of the nation’s currency, especially at the parallel market.
There has also been fresh concerns over the state of the economy whose health is measured with the exchange rate of the naira. For instance, the high exchange rate between naira and major foreign currencies, have pushed up prices of goods and services since critical factors of production are sourced outside our shores. Hence, the high rate of inflation, which is now almost 10 per cent, has further made life miserable for the masses.
Also affected by the falling naira are parents whose wards and children school overseas. For this group, a weak naira means more school and maintenance fees for their wards and children.
The naira, it would be recalled, used to be at par with the British pound and the US dollar. In the 70s for instance, the naira was just two steps behind the British pound while the naira was even higher in value than the US dollar. But all these have changed as the naira has crashed woefully!
Financial experts have blamed the fall of the naira against major foreign currencies on various factors that border on the running of the national economy. First, is the years of the locust unleashed by the late post war military regimes that bastardized the economy through massive corruption and experimental economic policies.
Particularly fingered in this direction was the Ibrahim Babangida regime. The IBB government reduced Nigeria to guinea pig available for all sorts of experimental socio-economic policies. With the Structural Adjustment Programme (SAP), naira began its massive devaluation trend. The move to redeem the economy from the recklessness of the Shehu Shagari administration of the early 80s would further triple the nation’s woes as things even got worse.
Naira, at this time, lost much of its value as the economy became unproductive.
The last opportunity to save the naira provided by increased oil revenue that came with the inception of the Olusegun Obasanjo regime was openly squandered. Much of this continued with the present administration, as Nigeria loses trillions of naira through alleged corrupt practices. Even as President Goodluck Jonathan insists that corruption is not Nigeria’s major problem.
But in his weekly opinion page in the Punch Newspapers on Monday, January 20, 2014, Henry Boyo alleged that over N3 trillion has been wasted in questionable subsidy by the Jonathan administration in the last one year. The respected economist blamed it on corruption and the fall of the naira.
Boyo decried that the naira is under ‘severe downward pressure.’ He argued that the trend must be arrested since naira exchange rate is the real driver of domestic fuel price and the so-called subsidy. Henry Boyo therefore, called for Monetary Payment Strategies that will ensure a stronger naira exchange rate below N97. This rate, he predicted, will even totally eliminate subsidy. Boyo is optimistic that a stronger naira would create a competitive platform that would enable Nigeria sell some of its oil at a favourable rate.
“Seriously, no successful economic transformation can be secured without first saving the naira.”
In his own view, foremost economist, Dr. Lanre Teriba has consistently advised the CBN to revive its monetary policy to free the economy and strengthen the naira. Arguing that Nigeria has one of the world’s highest interest rates, the financial expert believes that the naira would someday regain its lost value with the right mix of monetary policies which Sanusi’s CBN should drive with other members of the economic team.
And pending the adoption of these economic policies and genuine desire to transform the economy, it is obvious that things won’t get better soon, especially now that the naira has lost over 15 per cent of its value in less than 12 months.
– UCHE OLEHI