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Here is an opinion piece on the declining value of the Nigerian currency by Dele Lawore...
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Over the last few months, there have been numerous articles, OpEd pieces and social media rants about the devaluation of the Nigerian Naira, and the ability that Godwin Emefiele (CBN Governor) and President Muhammadu Buhari have demonstrated in stemming the Naira’s downward spiral.
The most recent article (some might say rant) I’ve come across on this topic is The Naked Convos piece in The Herald titled “See Why the Naira May Fall to the Dollar at N1,000/$”. Naked Convos argues that the Naira has declined, and will continue to decline, because Nigerians favor imported items over domestically produced Nigerian clothing, wine, shoes etc.
Leaving aside the sensational title and the fact that the article actually does not tell us WHY the Naira would deteriorate to N 1,000/$, I believe the overarching premise that preference for imported products is the root cause of the Naira's deterioration is a false narrative. While, it is true that there is way too much wealth being transferred from Nigerians to the home nations of LVMH, Spar and the iPhone, methinks Nigerians are not doing much different from residents of other emerging economies in today’s 21st century world. Most upwardly mobile citizens of the world want to travel, want new gadgets, foods and the best experiences that money can buy… i.e. they generally want the most bang for their buck (whether that buck be Naira, Dollar, Renminbi or Ruppee).
Where Nigeria may have gone off plan from other emerging market nations is believing and acting like we are a rich nation. Nigeria is not rich. Regardless of the substantial oil reserves and FY2015E GDP of c. USD 500bn, the largest in Africa, we are not rich. Tweaking that statistic to look at nominal GDP on a per capita basis (i.e. GDP divided by population) results in c. USD 3,000 – in case you were wondering, this does not even result in a top ten position in Africa. So while the country seemingly has lots of money, there are way more mouths to feed than dollars to feed them.
Yet, Nigeria's political and economic leaders continue to act like it is a wealthy nation. The Naira has been devalued several times over the last decade, yet we have not used the opportunity of a weak currency to develop our export capacity beyond crude oil nor promote exports. Crude prices have been at record peak levels over the last decade, yet we have not used these funds to develop basic infrastructure or improve the ease of doing business in Nigeria. We have on one hand deployed wasteful and lazy policies and on the other hand suffered at the hands of corrupt officials, who have stolen the country's future and thereafter been celebrated by local churches, mosques, universities and Nigerian society in general for their newfound wealth.
Onto this stage entered President Muhammadu Buhari in 2015. The polity's expectation was that he would be focused on delivering a lean government, stripping away wasteful expenditure and generally delivering well thought-out, aspirational and clear developmental objectives. So far this has not been the case - at least not to the desired extent. There is a significant proportion of Nigerians that are patiently waiting for the President Buhari led government to reinvent Nigeria's socioeconomic and political landscape. So far, such hope has not been entirely rewarded. One hopes that this will change, and change soon because the patience of Nigerians appears to be wearing thin under the burden of the declining Naira.
Written by: Dele Lawore, CFA
READ:
Over the last few months, there have been numerous articles, OpEd pieces and social media rants about the devaluation of the Nigerian Naira, and the ability that Godwin Emefiele (CBN Governor) and President Muhammadu Buhari have demonstrated in stemming the Naira’s downward spiral.
The most recent article (some might say rant) I’ve come across on this topic is The Naked Convos piece in The Herald titled “See Why the Naira May Fall to the Dollar at N1,000/$”. Naked Convos argues that the Naira has declined, and will continue to decline, because Nigerians favor imported items over domestically produced Nigerian clothing, wine, shoes etc.
Leaving aside the sensational title and the fact that the article actually does not tell us WHY the Naira would deteriorate to N 1,000/$, I believe the overarching premise that preference for imported products is the root cause of the Naira's deterioration is a false narrative. While, it is true that there is way too much wealth being transferred from Nigerians to the home nations of LVMH, Spar and the iPhone, methinks Nigerians are not doing much different from residents of other emerging economies in today’s 21st century world. Most upwardly mobile citizens of the world want to travel, want new gadgets, foods and the best experiences that money can buy… i.e. they generally want the most bang for their buck (whether that buck be Naira, Dollar, Renminbi or Ruppee).
Where Nigeria may have gone off plan from other emerging market nations is believing and acting like we are a rich nation. Nigeria is not rich. Regardless of the substantial oil reserves and FY2015E GDP of c. USD 500bn, the largest in Africa, we are not rich. Tweaking that statistic to look at nominal GDP on a per capita basis (i.e. GDP divided by population) results in c. USD 3,000 – in case you were wondering, this does not even result in a top ten position in Africa. So while the country seemingly has lots of money, there are way more mouths to feed than dollars to feed them.
Yet, Nigeria's political and economic leaders continue to act like it is a wealthy nation. The Naira has been devalued several times over the last decade, yet we have not used the opportunity of a weak currency to develop our export capacity beyond crude oil nor promote exports. Crude prices have been at record peak levels over the last decade, yet we have not used these funds to develop basic infrastructure or improve the ease of doing business in Nigeria. We have on one hand deployed wasteful and lazy policies and on the other hand suffered at the hands of corrupt officials, who have stolen the country's future and thereafter been celebrated by local churches, mosques, universities and Nigerian society in general for their newfound wealth.
Onto this stage entered President Muhammadu Buhari in 2015. The polity's expectation was that he would be focused on delivering a lean government, stripping away wasteful expenditure and generally delivering well thought-out, aspirational and clear developmental objectives. So far this has not been the case - at least not to the desired extent. There is a significant proportion of Nigerians that are patiently waiting for the President Buhari led government to reinvent Nigeria's socioeconomic and political landscape. So far, such hope has not been entirely rewarded. One hopes that this will change, and change soon because the patience of Nigerians appears to be wearing thin under the burden of the declining Naira.
Written by: Dele Lawore, CFA