Currency Depreciation: a monster to Nigerian Economy -By Chinedu Vincent Okoro

Filed under: Economic Issues |

Chinedu Vincent Okoro

Currency depreciation is a fall in the free market value of domestic currency in terms of foreign currencies (Lipesy 1977). It is indisputable that the Nigerian currency (Naira) has taken a degrading status since the mid June 2014 when the crude oil price peaked at 115 US dollar per barrel. It is worthy of note that naira depreciation has affected all the facets of the Nigerian economy and its consequences are too enormous to be overemphasized.

The depreciation of the naira has scared a good number of foreign investors who are afraid that the naira may degrade further. According to the report released by Ernst & Young (EY), latest Africa Attractiveness Index (AAI) which measures foreign direct investment reported that Nigeria ranked 17 in 2017 and 15 in the 2016. The naira has lost its value in the international market. It was discovered that in 1975, 75 kobo exchanged for one British Pound and in 1976, 60 kobo was exchanging for one dollar. It will annoy you to know that over 356 naira exchanges for one dollar today. This is unlike Ghana, which is among the top ten countries on EY and AAI 2017 where 4 Cedis exchanges for 1 US dollar. This is the reason why foreign investors are trouping to Ghana. Some companies in Nigeria have moved their businesses to Ghana.

Furthermore, the depreciation in naira’s value has led to the high cost of imported goods/ raw materials. We cannot deny the fact that 80% of the products consumed in Nigeria today are imported. The home-based importers now spend more to buy commodities needed in Nigeria and this makes them to sell the same commodity at a cut throat prices in order to meet up or cover the expenses incurred in purchasing the commodity abroad. According to researches carried out so far, it was discovered that in 1981, a tin of milk was sold for 20 kobo while a crate of Coca cola in the same year was sold for 2 naira. What are the costs of milk, Coca cola today?

Again, Naira’s depreciation has increased the difficulty in paying Nigeria’s external debts. According to a publication on Trading Economics, Nigeria’s external debts have increased to 1.5 billion US dollars in the second quarter of 2017 from 1.3 billion US dollars in the first quarter.

Also, there is high rate of unemployment and poverty in Nigeria today as a result of depreciation of the naira. According to the latest Unemployment Watch report by the Nigerian Bureau of Statistics (NBS), between December, 2015 and March 2016, the population of unemployed Nigerians increased from 518,000 to over 1.45 million. It may interest you to know that unemployment rate increased to 14.2% in the last quarter of 2016 from 10.4% earlier due to the fact that many Nigerian firms were unable to pay their personnel. For instance, the publication by Financial Nigeria on the 22nd June, 2016 stated that the net worth of the Africa’s richest man, Aliko Dangote declined by $4.2 billion US owing to the depreciation of the naira. This resulted in the sacking of 36 expatriates and some Nigerian workers. The high rate of unemployment in Nigeria today has resulted to high rate of poverty. From to the latest report by the Nigeria Bureau of Statistics (NBS), it was gathered that about 112 million Nigerians (representing 67.1% of the country total population) are sacredly impecunious.

Moreso, it poses threat to national integrity. National integrity as the name implies, is the quality of being honest and having strong moral principles, uprightness. Depreciation in the value of the naira has made many Nigerians to soil their hands by getting into unethical business. How many market women/men in Nigeria today are truthful when it comes to the selling of their products? Some of them have devised negative means of marketing their products at the expense of the poor masses. Where is the moral standard of armed robbers, prostitutes, kidnappers, fraudsters, etc? There is none.

Lastly, depreciation of the naira creates dichotomy between home-based workers and foreign-based workers. According to researches carried out recently, there is a big difference between the two. For instance, local workers such as laundry men, mortuary attendants, road sweepers, drivers, barbers, etc. are more successful to home-based local and professional workers. How many average Nigerian Youths would agree to be a mortuary attendant here? None. It will take you aback to know that the same youths would conveniently do the same job in foreign countries like Germany, USA, London, etc. Also, most of the mega projects in some localities investigated are owned by people living abroad. You can go ahead and do your own investigation. All these are thanks to the depreciation of the naira.

In conclusion, naira depreciation has caused more harm than good to the Nigerian economy and it is telling greatly on Nigerians. Nigeria is a country blessed with over 200 natural deposits, but the government, for some good number of years, has focused more on the exploration of crude oil, and this is a major reason for naira depreciation. I vividly recall that the Nigerian economy was waxing strong in early 60’s, before the discovery of crude oil. Over time, the government has been talking about diversification of the economy, but there has not been any pragmatic step taken to do so. Everything about diversification of the economy has been on the pages of newspapers. The government should take an urgent action by launching a working intervention plan on diversification of Nigeria’s economy. Also, the government should introduce some policies to curtail the high rate of importation of finished goods into Nigeria, especially those we can easily produce locally. They should help to fund the local industries in order to give a boost to the production of some of the products imported into our country. The Nigerian citizenry should inculcate this habit of appreciating our home-made products and forget this mentality that foreign made products are better than our home made goods. If all these are in place, the Nigerian economy will grow to an enviable height.

Chinedu Vincent Okoro is a Nigerian Writer cum Political activist. He is a graduate of Educational Management and Political Science from Enugu State University of Science and Technology (ESUT). He is the Public Relations Officer (PRO) of Association of Nigerian Authors (ANA), Abia State Chapter. An Ambassador of words Cesar Egido Serrano Foundation (Spain) and the President of St. Vincent Literary Forum Nigeria. You can connect with him on Facebook, twitter, instagram, goggle+. You can also reach him through [email protected]