By Kabiru Isa Dandago
The continuous fall in the value of the Naira (the Nigerian monetary currency) started from the era of Structural Adjustment Program (SAP) in 1986 (when the Naira value fell from 85k for 1$ to N4 for 1$). This continued until around 1995/1998 when the Abacha regime made some unscientific efforts to control the value of the Naira at around N85 for 1$. For the AAA’s one year regime (1998-1999) and since the commencement of the 4th Republic (1999) to date, the Naira value has been on decrease when measured against other international currencies, especially the US Dollar. The decrease in the value of the Naira has been most frightening from 2017 to date. Allowing the value of the Naira to continue to fall is akin to Nigerians digging their own graves.
The Nigeria economy is enjoying the rating of being Africa’s largest economy, but it exports mostly crude oil. For its consumption, it imports almost everything, spending its foreign earned currencies. According to Nigeria’s foreign trade report (2020), Nigeria spent about N16.959 trillion ($47 billion) on imports compared to N13.1 trillion ($36.5 billion) a year earlier, in 2019 alone. In the same year, the country spent about $28.7 billion on invincible cost elements like services such as professional fees, financial services, business travel, medical tourism, etc. This spending attitude on imported items increases pressure on the Naira and is greatly to the detriment of the masses, especially those in fixed salary employment and those that are unemployed.
Nigerians need to critically review the causes of the fall in the value of the Naira, in comparison with the currencies of other countries of the world, with a view to finding lasting practicable solutions to the identified problems. This is what would halt the grave-digging exercise Nigerians are into, as control measures are not taken year-in, year-out. The measures to be taken could be economic, political, legal, or social, depending on the capacity of each stakeholder in an effort to contribute to the search for lasting solutions to the problems instead of engaging in mere talk-talk. But in a democratic society, which Nigeria claims to be, political measure is the key.
Leading the pack of the causes of the fall in the Naira value is import dependency, a situation whereby the Nigerian economy imports almost everything, ranging from essential commodities, vehicles, machineries, plants and equipment, wears, building materials, and even refined products of the crude oil that is extracted in the country. As importers need foreign currencies to buy what to import into the country, they have to pay too much Naira amount to get too few amounts of hard currencies for the import. When they import, the price to charge for the imported goods or services would be high against the Naira’s power for coverage locally. As this continues, the Naira must continue to fall drastically in comparison with foreign currencies.
Over the years the Nigerian governments have been very careless about taking measures that could industrialize the economy for massive production of goods and services that could serve local demands, the excess of which could be exported for foreign exchange earnings. The more an economy imports goods and services, the more the value of its currency diminishes. The most important measure towards halting the continuous deterioration in the value of the Naira is for Nigerians to commit themselves towards ensuring that the country produces all (or most of) the goods and services needed internally. How would Nigerians do that.
First, they have to put in place a democratically elected government with people that have the required doggedness and commitment towards catching up with the advanced world within a reasonable period of time (maybe 6-10 years). Countries in the advanced world have all passed through the processes of economic development via Hunter Economy, Agrarian Economy, Industrial Economy, Information and Communication Technology Economy and now Knowledge Economy. The Nigerian economy is still at the agrarian level (considering the fact that the present government of PMB is always talking about reliance on agriculture for development). In modern economic system, agricultural sector is only a provider of foods, but not a source of wealth creation or employment generation (as mechanization in agricultural productivity is the order of the day). One wonders as to whether Nigeria is still at the Hunter Economy level!
To halt the continuous fall in the value of the Niara, it is the responsibility of Nigerians to put in place a government with highly knowledgeable, competent, and patriotic people that could take the country up to the industrial economy level, where the capacity to massively produce the goods and services needed locally could be obtained, in a matter of 6 years. The government should also have the competence to make reasonable incursion into the ICT and Knowledge Economies for the Nigerian economy to be reasonably part of the global village. This is very possible in view of the fact Nigeria is blessed with many honest and trustworthy potential leaders, apart from the too many human and natural resources available in the country. If Nigerians are not ready to do this, then it means that they prefer to continue digging their graves, as the Naira keeps on depreciating, until they bury themselves in the graves.
What are the challenges of making Nigeria an industrial economy? Clear presence of justice and fairness in the treatment of every Nigerian (individual or firm); high quality education, entrepreneurial orientation, and healthcare; adequacy of electricity; adequacy of drinking and useful water; efficient financial system; provision of sustainable infrastructure; and effective foreign policy. Had it been that Nigerans are serious about sustainable development of the country (not just the issue of strength of the Naira), they would not have been taken away for too lengthy ride before they realize the need for them to put in place a government that would ensure that the seven challenges are overcome for the country to catch up with the developed world and have the Naira listed among the strongest currencies in the world. The problem is first and foremost with the mobilization capacity of Nigerians for the identification and election of competent people that are capable of dealing with the impediments to the industrial development of the country. There is need for the blame game against the leaders to be carefully assessed in line with the critical question raised by a former Senate President as follows: “Are Nigerian leaders corrupt because their people are poor OR are the people poor because the leaders are corrupt”? According to him, the game is just like the chicken and egg riddle! Let the Nigerian people pave the way for solutions to the problems of the country by abhorring ‘politics of the belly’ and insist on putting in place meritorious leadership at all levels in the country.
As mentioned earlier, when local demand for goods and services is satisfied locally there would be no need for foreign currency to be chased by the local currency (the Naira for example). In fact, when excess products and services are exported to other countries that need them, the value of the local currency is bound to appreciate against the currencies of the importing countries. This is the most important measure needed to control the fall in the value of the Nigerian dear currency, the Naira. It is not a matter of governmental control or persistent prayer (without any effort), but a matter of actions along the line of putting serious government in place, with serious minded and honest leaders that could deal with the seven challenges mentioned in this piece.
Other important causes of the continuous fall in the value of the Naira are (2) Nigeria’s reliance on a single export product (crude oil) and its unreliable pricing mechanism; (3) Nigeria being a debtor nation (especially public foreign debts) making the country to be subjected to many conditionalities from the creditors (including devaluation of the Naira); (4) poor internal revenue efforts, amounting to incapacity to finance ambitious developmental projects; (5) continuous development of deficit budgets, which is mainly financed using public debts; (6) poor budgeting system (especially budget implementation); (7) inconsistent fiscal policy articulation and implementation; and (8) the citizens’ insatiable appetite for foreign products. Each of these seven other causes of the fall in the value of the Naira has some relationship with the main cause discussed above, but they are not the same.
For the value of the Naira to stop depreciating drastically against other global currencies, like the Dollar, Pound Sterling, Euro, Yean, etc, there is the need for the Nigerian government to find lasting solutions to all the 8 causes highlighted above, especially the first one which has been extensively discussed. It is not for the government, through the Central Bank of Nigeria (CBN), to come up with a blanket pegging of the exchange rate of the Naira or allow a dual exchange rate regime to operate as a way of controlling the fall in the Naira value, scientific measures, like those discussed in this piece, need to be doggedly adopted to halt the fall in the value of the Naira. But, more importantly, Nigerians need to wake up from their deep slumber and be up to their task of democratically putting in place competent people as leaders at various levels of governance, so that the identified weaknesses making Nigeria an import-dependent economy could be dealt with, as soon as possible. This is the scientific way of halting the fall in the value of the Naira before Nigerians get buried into the graves which they dig themselves.
Dandago writes from the Department of Accounting Bayero University Kano-Nigeria can be reached via kidandago@gmail.com, +2348023360386
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