The rising inflation of the Nigerian naira is a direct consequence of the currency losing value over a period of time and its effects on the Nigerian citizenry is far-reaching. From household goods to enterprise merchandise, it appears that less value is received in exchange for equal or more money. According to the International Monetary Fund, the long term depreciation of the naira equates to the loss of 10.6% of its value annually since 1973, and this rate is 1.5 times higher than the long-term rates of currencies of other emerging economies which is on the average 7.2%, and 7% in sub-Saharan Africa. The various attempts to shore up the naira have fallen short thus far and ordinarily, Nigerians feel the effects of this depreciation the most. On the first edition of Business Edge this week, Tolulope Adeleru-Balogun is joined by Muktar Mohammed, CEO of Asher Dynamic Solutions and they look at the possibilities of stopping the naira’s depreciation.
Devaluation is the reduction in the official value of a nation’s currency or legal tender in relation to other currencies at any foreign exchange. This, according to the IMF has been steadily declining over the last 49 years in Nigeria. “You can’t argue with data,” Mohammed says. “The inflation and depreciation rate weren’t this high in 1973 but the naira started its nosedive between 1980 and 1982 and took the highest dive when the Structural Adjustment Programme was introduced.” Things haven’t improved by much he says because the fundamental ways they’ve been done by successive governments and policymakers haven’t changed since that time; especially as Nigeria is more of a consumer nation than a manufacturing one.
He adds this has essentially killed off the middle class in Nigeria. “There are two classes of people in Nigeria: the very rich and the very poor.” The depreciation is felt worse among the masses because the apparent palliatives such as fuel subsidies don’t get to them and the government’s inability to diversify the economy impacts them directly. Tolulope and Muktar also discuss the effect of this depreciation on businesses, possible ways out and more.
Watch Business Edge in full above.