CEM REPORT | The continued devaluation of the Naira now raises serious fear in the mind of Nigerians who sees a blinking future for the country except there are urgent and sincere policy measures by the government to reverse the frightening setbacks
A Petroleum Economist, Dr. Ahmed Adamu in an article titled “Big Economic Crisis Looms in Nigeria” posted on Daily Trust recently, raised serious concern over the true worsening value of the Naira and the worsening perception of the Naira by Nigerians
Adamu raised concern over the growing practice where Nigerians now convert Naira to Dollars in commercial banks in anticipation of further devaluation. .
His article reads in part:
“The Nigerian currency faces the worst devaluation ever as Nigerians shun away from their local currencies. There are now competing dollar queues in Nigerian banking halls. Nigerians are rushing to open dollar accounts and converting their savings into dollars.
People prefer to store their money in dollars than in Naira, as keeping the dollar alone is now a lucrative investment due to the continuous Naira devaluation. The increasing demand for the dollar increases the supply of the Naira and hence its continuous devaluation.
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Most of the demand for the dollar is not for transaction purposes but speculative reasons. Hoarding the dollar and waiting for it to increase value to sell it is disastrous and treasonous economically.
Dollar hoarding and speculation increase the supply of Naira in circulation and fuel even more inflation. Already the headline inflation is as high as 16% as of the first quarter of 2022. More Naira in circulation will increase inflation to above 20%. As the 2023 election season has started, election and campaign spending by politicians will fuel even more inflation.
Naira is losing value in the eyes of Nigerians, and that’s why it will continue to deteriorate. Some hotels, landlords, and schools in Nigeria charge in dollars instead of Naira.
Trading local goods and services in dollars is the surefire way to total economic collapse. Even government transactions and spendings are also in dollars. These created huge dollar demand and scarcity and shot its value high, which as of April 2022, stands at N590 in the parallel market.
Foreign investors are now finding it difficult to repatriate their revenue from Nigeria in foreign currencies. Some international airlines have complained about their inability to repatriate their revenues in dollars, which forced them to now sell their tickets only in dollars. This development will further increase the demand for the dollar and the oversupply of the Naira and further devalue the Naira.”