On Sunday, August 15, 1971, the United States economy was literally facing a firing squad. The Dollar was in a mess. Price gougers were everywhere and foreign exchange was cruel to the Dollar. The newspaper headlines were of scorn and ridicule but President Richard Nixon did one thing. He faced the issue squarely. “The strength of a nation’s currency is based on the strength of that nation’s economy,” he said.
The plummeting value of our currency triggers growing frustration among the public; the persistent decline of the Naira threatens to escalate suicide rates and social unrest.
Nixon nipped the problem in the bud. Everything changed. He rescued his country from financial and social crises. Today, Nigeria is in a similar situation, albeit slightly dissimilar, given that the American economy is by far the strongest in the world. Thus, President Bola Tinubu needs to act in a manner that moves the nation from “Renewed Hope” to “Renewed Confidence”.
The loss of hope was what triggered the Arab Spring and other springs. In December 2010 in the town of Sidi Bouzid, Tunisia, Tarek El-Tayeb Bouazizi, a trader who had lost hope in the economy of his country, set himself on fire. That act became a catalyst for countrywide protests. The protests included several men who emulated Bouazizi’s act of self-sacrifice. Hope is good. However, hope is not edible.
In Nigeria, there are reported and unreported suicide cases due to economic hardship in the country. A few weeks back, a woman who works at a Bank locked herself in the convenience of her company and swallowed poison, leaving behind a suicide note which points at her giving up on Nigeria.
The plummeting value of our currency triggers growing frustration among the public. The persistent decline of the Naira threatens to escalate suicide rates and social unrest. In Kano State, local bakers protest the exorbitant price of flour, highlighting potential economic setbacks and enduring impacts on overall economic performance.
For a government looking for an economic spark plug through Foreign Direct Investment (FDI} and business startups, the fall of the Naira and global jokes about it are downright depressing. The fall of Naira indeed poses grave dangers to the viability of businesses in Nigeria. Last August, Iyinoluwa Aboyeji, a young Nigerian celebrated all over the world for creating two unicorns and a general partner at an early-stage venture capital firm, Future Africa, told Rest of World, an America-based publication, that his firm is advising its portfolio companies to explore business abroad to avoid Naira-related challenges.
Jokes about the naira
Over the past two weeks, social media has been flooded with jokes mocking the devaluation of the Naira, Nigeria’s currency. International sources, including a Toronto-based TV station and a South African publication, highlighted its low value. Bloomberg labelled the Naira as the world’s worst-performing currency. Local media also contributed to the ridicule. These jokes symbolise broader issues, causing Nigerians to question their faith in their country.
There are genuine concerns that Nigeria may follow a similar trajectory to Zimbabwe and Venezuela. This concern is well-founded. The echoes of Zimbabwe ring eerily and loudly in Nigeria today. There are many reasons why history students could look back on the crash of the Naira and its impact on our reputation, global stature and the living standard of our people. This concern is heightened for many reasons. However, I will highlight only a few.
Concerns over the naira
The first is poor policy articulation and implementation. Recall that the policy origin of the current Naira tumble can be traced to the simultaneous removal of subsidies and years-long currency pegs last year by the current administration. This was done without considering other factors that need to be in place to make the economy function optimally. Nigerians are worried that our economic handlers are not doing enough to stem the decline.
The second is the damaged reputation of the country occasioned by the Naira crash and the ongoing economic and security instability. Local and foreign investors are losing confidence in the Nigerian economy because of high-level financial, economic and political instability.
The next is that the cost-of-living crisis escalates and inflation ravages the country. Prices of essential goods and services are going off the roof and people are perplexed at the rate of degeneration.
The fourth is that microeconomic indices are unfavourable given the reduction in demand for goods and services due to high prices and reduced supply. The latter itself is due to lack of production or high cost of importation.
Also, there are unfavourable macroeconomic indices such as the escalation of unemployment. This correlates with a high crime rate, high inflation occasioned by a fall in the value of the Naira, banks’ inability to grant medium to long-term loans and a general perception of impending economic catastrophe hovering over Nigeria like an ominous overcast.
The fifth is that wealthy Nigerians and other average citizens worried about the erosion of the value of their money and assets are converting them into Dollars or are moving their assets to dollar-denominated investments abroad to hedge for further loss.
Finally, the volatility of the Naira implies that fresh capital investments in infrastructure and power, mainly dependent on imported plants and machinery, shall be negatively impacted, leading to projects being put on hold.
How did we tumble in such a short time from a respectable nation to a butt of jokes? Not only amongst us but within the global community?
A brief historical odyssey on Naira volatility suffices. The tragic history dates back to 1983 when the Naira began her nosedive and successive governments have failed to ameliorate the plunge. In 1983, $1 was exchanged for about 72 Kobo. But the Naira fell to trade at about N9 to $1 by 1990. In 2000, $1 was exchanged for about N85 at the official window.
In 2010, $1 was officially exchanged for about N150, but more at the notorious black market. By 2020, $1 was exchanged for about N360 at the official window. In recent years, the Naira has faced challenges related to external factors. These include fluctuations in oil prices, the global economic impact of the COVID-19 pandemic and serial mismanagement.
The administration initially responded calmly to the Naira crisis, anticipating its fall. However, panic ensued later, prompting a series of monetary, fiscal, and tax policy adjustments, alongside currency interventions. Structural reforms aim to diversify the economy and improve the business environment but have yet to stabilise the Naira. Additional measures are deemed necessary for a lasting solution.
Additionally, the success of these measures depends on practical implementation and the cooperation of various stakeholders. Investor confidence remains our greatest challenge. It is advisable for this Administration to carefully analyse the specific economic conditions and consult with experts to tailor appropriate solutions for the country.
Every good head, home and abroad must be brought into the room to stop us from remaining a butt of jokes. Saving the Naira is most important now and all stakeholders must work together to end this comedy show.