Once upon a time, around 1972-1983, the Nigerian Naira was worth more than the dollar as $1 (1 USD) then traded below #1 (1 Naira). This didn’t last for more than that initial ten years as the Naira began to fall gradually since then. Usually, currencies aren’t stable, their values fluctuate due to several economic conditions thereby causing them to rise and fall. But the Nigerian Naira has a long history of falling. The few times it managed to appreciate, it went down lower after.
What is inflation?
Inflation is the rate at which a currency loses value by reducing purchasing power while prices of goods and services increase. When a currency can no longer buy the goods it used to buy or when goods and services are generally more expensive, a currency is said to have been inflated. Inflation is measured in percentage (%).
Inflation in Nigeria
According to a document by the National Bureau of Statistics (NBS), the inflation rate in April 2022 is 16.82% on a year-on-year basis.
For context, the inflation rate in Nigeria from 1996 to 2022 has averaged 12.67% according to Trading Economics. This implies that prices of goods and services have consistently risen and supply of the Naira has also increased.
The Nigerian Naira
You can’t talk about a country’s economy without mentioning its currency. In fact, a nation’s economy revolves around its currency.
The Nigerian Naira was issued in 1973 while Chief Obafemi Awolowo was the Finance Minister. The 10 Naira note was the highest denomination at the time, so, it had the picture of Chief Awolowo on it. #10 (10 Naira) then was about $6.2 as a #1 traded for just $0.62.
Moving forward, a lot has happened and has contributed to the fall of the Nigerian currency, and also crippling its economy.
Several factors have contributed to the fall of Nigeria’s economy. The biggest factors are outlined below:
- Cost of production: Producers in Nigeria are at liberty to hike the prices of goods and services as they so desire. It is understandable when imported goods rise in price as this is usually caused by fluctuating exchange rates. But locally made produce and raw materials also randomly, and suddenly just go up. Historically, prices of raw materials in Nigeria go up but never come down. The lack of government regulations on the prices of these things has caused producers to enrich themselves by inflating the prices of their products thereby devaluing the nation’s currency. Even people who don’t want to inflate their prices are forced to do so because of the change in the price of raw materials. They need to stay in profit to stay in business,
- Lack of enabling environment for producers: asides oil, Agriculture is another strength of Nigeria and an alternative source of revenue generation, and food is a necessity. Considering the estimated population of over 216 million according to Statista in 2022, it is definite that people who produce Agricultural products should be millionaires. But as fate would have it, many of the nation’s farmers are poor, they can’t possibly meet the demands of the nation’s population which are on the rise. This has forced an increase in the price of agricultural products further devaluing the Naira.
The more we produce our own goods, the less we import, and the better for the economy. The country’s population is large, so, to meet the demands of this increasing population, more people have to go into production. The interest is there, but the money isn’t. Making grants and loans readily available to farmers in the country will go a long way in making food relatively cheaper. It is a chain; if more farmers are producing, there’ll be more food, prices will be reduced, more people will be fed, and the crime rate will also reduce thereby creating an enabling environment for more businesses and enterprises.
- Insecurity: Nigerians are a very hardworking lot. It is one thing to want to work and yet another thing to have a peaceful environment to carry out such work. Many businesses and enterprises have closed down due to the increasing rate of insecurity in the country. But people must eat whether food is produced or not. This implies more exports than imports, another hit on the Naira, and the economy.
Possible solutions to salvage the situation
- Government Regulations: A good government can make life really easier for the common people of a nation. The government can work on providing access roads, subsidizing fuel, meeting electricity needs, and other basic things that generally make life easier. After making sure of the aforementioned, there can then be regulations on the prices of different commodities, so, people don’t suddenly wake up and decide something is now worth twice the amount it was before and owe nobody an explanation for why it is so.
- Provision of loans and grants: Nigerian producers have the natural resources it takes to compete with their foreign counterparts. What they lack is mostly the types of machinery for the processing which is acquired with a huge amount of money. There’s no big difference between locally made rice and foreign rice except for the fact that the local rice is usually filled with stones. Farmers have tried their best to eliminate these stones but there’s really little they can do without the right processing machines which they can’t afford. A helping hand from the government in acquiring such machines will go a long way in reducing the importation of food such as rice, making food cheaper, and flourishing the economy.
- Security: people are scared to do business due to insecurity, and businesses are scared of expanding for fear of the unknown. Some Nigerians even go abroad to establish solid start-ups that would have been a game-changer for the country. If there’s a more peaceful environment, the economy will flourish. The government has the power to curb insecurity or at least bring it to its bearest minimum, perhaps they don’t have the intention.
Salvaging the economy of Nigeria and the Nigerian Naira rests greatly on the Nigerian government. The country and the economy can get a lot better if only there’s a willing government.
Nigeria is blessed with all the resources it needs to be greater than it currently is and stay on top as the giant of Africa but it requires the right people to make this happen.