Nigeria: Naira vs dollar

‘How did we get here?’ You hear this ever so often when expectations are dashed and people receive rude wake-up calls, especially when overwhelmed with the enormity of the weight of the economic deprivation – hardly a day passes without hearing this question from one Nigerian or the other as they gasp accepting something unpleasant and feel resigned to fate.

However, despite the difficulties Nigerians are going through which have been aptly described in some quarters as “T-Pain” – many have referred to what they are going through as unspeakable economic brutality, Nigerians are still sports-loving people. The passion shown by many Nigerians during football seasons in Europe is unmatched and out of this world. Me, my sons and my dear friend, ‘Yemi Ayandiji, go all out for our respective premier league teams, wishing them to ‘humiliate’ their opponents. Steering this to an unlikely area, one which there is the tendency many of our political leaders would love not to mention because they are equally caught in the web of this dire act, which undermines the prosperity of the people they swore oaths to protect and preserve, the wanton dollarisation of our economy, appears to have taken central rostrum leading to a keenly contested battle between the naira and dollar.

Over the years, the naira and the dollar have been two currencies trying to outdo and ‘humiliate’ each other in our socio-economic circle but sadly, for several years now, the dollar has been making headway, edging out the naira and hampering monetary policy possibilities in the process due to the massive pressure on the naira, in a country where there are laws governing our economic and financial conduct.

The Nigerian economy has become a stage where the naira is being taught unforgettable lessons as far as the ‘currency battle’ is concerned. The crisis in the forex market has reached a crescendo which is affecting every sector of the economy. A watershed moment in the life of the country where so much has been said about how the journey that diminished the value of the naira began. The way and rate at which Nigeria’s economic fortunes took a dramatic turn for the worse, though anticipated by many experts given the leadership deficit and deep-seated corruption which has caused a ripple of concerns and crashed confidence, is as mysterious as it is tragic. As you analyze the state of things about four decades ago and what is happening now, it provides a window into how devastated things have grown economically.

The dollarisation of our economy, which commenced in the mid-1980s when the dollar started to seize the role of the naira as a medium of exchange in Nigeria, has taken the country to uncharted economic territory and opened the gate to punch the knife against our fortunes. Urgently reversing this trend made worse by several videos of political leaders spraying bundles of dollars at parties, property values, and luxury apartments priced in dollars, some ivy schools and high-end hotels insisting fees are settled in dollars, etc, is critically essential because it forms a big part of the direction this nation goes economically.

Way back in the days growing up in the ancient town of Kaduna, the administrative seat of Northern Nigeria, I witnessed how domestic production blossomed in different sectors of the economy – especially agriculture, manufacturing, transportation, etc. The country’s industrial base was one of the most active in Nigeria and Africa with the likes of Peugeot Automobile Nigeria Limited (P.A.N.), Bata Limited, several textile industries, etc, taking pivot podium in national and international discourses. Nevertheless, with the rate of corruption spanning and the increased appetite for dollar consumption by Nigerians especially by the wealthy, there was a clear potential for the economy to spiral downhill as it is being experienced now.

It is vital that I do not miss the opportunity to highlight that the shift, mostly by the rich and political class, to the dollar is not in the interest of this country and I cannot characterise it as nationalistic. There are a number of events one can call bizarre – or how do you explain vendors insisting that certain transactions must be sealed in dollars in Nigeria? As far as I’m concerned, there’s no innocent explanation as to why certain Nigerian companies would demand that payments for services must be dollarised.

Speaking on the sidelines of the World Bank/IMF annual meetings in Washington DC, the minister of finance and coordinating minister of the economy, Wale Edun, was quoted by Nigerian Tribune of October 24, 2024, “The federal government is actively pursuing plans to de-dollarise the Nigerian economy by strengthening demand for the local currency”. He revealed further, “Local service providers, regulators, and others are being encouraged to “invoice in naira rather than dollars”. I am particularly hopeful that this assertion by the honourable minister would not be to just score political points; rather, that addressing this issue will truly finally get on the way and feature prominently on the key to-do list of this government, using every tool in her arsenal to rein it in by first tackling the extremely low production of goods and services and the raging inflation which are leading people to want to store values in dollars.

Furthermore, this situation, which has assumed what can best be described as an absurdity, should not be happening in the first place. The Central Bank of Nigeria Act of 2007 and the various CBN circulars on dollarisation prohibit the use of foreign currencies in Nigeria. Section 20 of the Central Bank of Nigeria Act, 2007 (“CBN Act”), provides that currency issued by the Central Bank of Nigeria (the “CBN”) is legal tender in Nigeria at its face value. The unregulated use of the dollar has led to a monumental demand for it, worsening the value of the naira. Unfortunately, the regulatory authorities that should enforce these regulations are caught flat-footed, and they appear as if they have little to go on when there is a preponderance of cases out there in the public domain.

Gigantic resources are allocated to these government agencies year in and year out, and they have to give as much as they can and serve the interests of the Nigerian people. It is a real and chilling possibility that if it continues at the rate it currently is, the value of the naira will continue to slide and that means the quality of life most Nigerians yearn for would be a mirage and unattainable. To show the seriousness and the illegality of the dollarisation process, the legal sage and human rights activist, Femi Falana (SAN), filed a suit at the Federal High Court in Lagos against the Central Bank of Nigeria claiming that, “the seeming non-performance of the defendant’s statutory obligations culminated in dollarisation of the country’s economy, which in turn affected the country’s economy negatively contrary to the objectives of the defendant as enshrined in Section 2 of CBN Act”. It is therefore crucially imperative that these authorities roll the dice and curb these excesses to save our economy.

Economies are typically tied to the strength of their currencies. What determines the strength of the currency? Is it not the goods and services provided by the economy? The stronger the currency, the more resilient and robust the country’s economy would likely be. Once the demand for a nation’s currency wanes and shifts to other currencies, the value of that currency, expectedly, drops. Yes, the dollarisation of our economy weakens the naira and leads to an unsavoury wave of events like hiking inflation, erosion of purchasing power and value, spiking of poverty, etc. However, a strong naira value only would not guarantee a strong economy and usher in wealth for the people, there are other germane factors. There is a proverb in Tiv Land which says: “When you see a rat running into the fire, then you know that what it is running from is hotter than the fire”.

Without a doubt, one can safely assume that what is ‘pursuing’ Nigeria and causing unmet economic expectations is beyond just the dollarisation of her economy. It is hotter than it. There are much bigger and deeper issues. The country cannot continue to be import-dependent, relying almost exclusively on importations to service domestic markets. Also, there is an urgent need to re-jig domestic production and the industrial base, the likes experienced back in the day. The much talked about lack of respect for the rule of law and corruption which looks to have been legalised and described as “Official” by Simon Kolawole in one of his classic pieces, “How do you preach national values in a country ravaged by official corruption, low public morale, and discontent?”, are some of the other factors, smithereens of the economic puzzle, and key ingredients required in the making of that giant recipe, economic growth, and development. If left unchecked, they have the capability of dooming any prospects left in getting the country out of the economic woods, annihilating the potential inherent in the implementation of the wide-ranging economic policies of this administration and curtailing any chance left of creating what may be a decent situation for an economic comeback.

Just as he did by pulling off the execution of those policies which remained mere rhetoric with past administrations, President Bola Tinubu must demonstrate once again that he has the spine to arrest these anomalies which threaten the economic sovereignty of the nation and one which I think constitute threats to our national security.

The Nigerian people’s increasing desperation for a reprieve from these economic and financial pains is palpable. Hankering for a quick change in their financial status should be a call for the government to act quickly and without any hesitation. Nigerians understand that with each failed attempt to get the nation to address these problems, the capability of setting a narrative of ever-flipping the era of economic downtroddenness and turning things around slips further and further away. In several ways, nonetheless, I must say that President Tinubu has not been all talk with no action.

Well, he has shown that he likes to make uncommon deals. However, a suite of economic policies by this administration which are designed to toss the dragging and suffocating economy a lifeline and revamp decision-making and government policy would remain elusive if the fiscal and monetary matters are not reconciled to achieve an efficient macroeconomy management.

While you may not completely agree with him on many issues, you cannot but like and appreciate Tinubu’s spunk at the way he tenaciously and relentlessly pushes through on a number of fronts these policies even in the face of stiff opposition. Nigerians only hope that he can exercise and extend a similar resolute character to fix the widespread dollarisation of the economy and the many other social issues, the likes of which the country has not experienced in modern-day Nigerian history. Nigerians, hoping politics would be put aside and the humanity in our political leaders would rise, cannot wait to put their chins up and put their shoulders which have been bent, for a considerable number of months now due to the crippling economic situations of the country, back up, hoping that our resources, which are as good as you can ever find, are deployed to meaningful use to better their lives.

Ande, a financial and political economy analyst, writes from Lagos and can be reached via [email protected]