These are definitely not the best of times for the naira, Nigeria’s beleaguered currency. For some time now, it has been on a free fall, exchanging for well above N700 to a dollar at a point. On Monday this week, the naira depreciated at the parallel market following renewed demand for dollars by importers, closing at N668 to a dollar. The situation was the same at the Investors and Exporters (I&E) forex window, Nigeria’s official foreign exchange market, where it closed at N431/$. On Tuesday, the exchange rate between the naira and the US dollar was N428.75/$1 at the I&E window. At the black market, the naira depreciated to N675/$1 even as traders lamented the scarcity of forex amid sustained high demand. It is common knowledge that the naira has been under immense pressure in the past two weeks, falling from an average of N618/$1 recorded two weeks ago. Bureaux de Change operators have been attributing the naira’s free fall to the lack of forex amid a surge in demand.

According to the Association of Bureaux de Change Operators of Nigeria (ABCON), the fate of the naira is traced to panic buying. Instructively, Nigerians who took a bet against the local currency by converting some of their naira savings into dollars in January this year are said to be currently smiling to the bank. And not a small number of analysts are linking the continuous weakening of the naira to rising import bill, dollar savings and the accumulation of cryptocurrencies by Nigerians who have lost confidence in the naira. Dollar shortage at the official market has led to increased demand at the parallel market, especially by importers of petroleum products and others. It stands to reason that if the official forex window is becoming increasingly difficult because of reduced liquidity, the black market is going to witness increased activity, especially with the Central Bank of Nigeria’s (CBN) forex restrictions on certain items still in place.

The situation seems to have defied all measures by the CBN, the Ministry of Finance and other relevant agencies. A key measure of the health of the economy is the exchange rate and it is a no-brainer that the free fall of the naira is propelled by the country’s falling economic fortunes. All over the country, businesses are in dire straits. Unemployment and inflation are rife. But as we have said time and again, the key to solving this problem is production. The government must do all it can to enhance the productive sector. In this connection, it is hardly in doubt that there is very little that can be achieved with poor power supply.

There are legitimate fears that the situation could escalate as the campaign for 2023 progresses with politicians mopping up dollars just like they did during the unholy bazaar called primaries. This means that the naira, which has been falling in value in relation to foreign currencies for some time now, recently reaching the worst ever rate of over N700/$1, could be in for more trouble. This is in spite of the publicly stated strenuous efforts of the CBN and the government to defend the naira and prevent it from becoming a worthless currency. The truth, however, is that there is no serious way to defend a currency when the economy is suffering from the lack of production or dwindling production and productive capacity, and where the government continues to engage in jamboree spending of money that it has not earned, relying on loans and more loans. The end result for such a country would be the eventual collapse of its economy and a certain gradual forced depreciation of its currency until it reaches the level of worthlessness. Unfortunately, this is the path to which the naira is inevitably condemned unless the government wakes up to reality and checks its profligate approach to the management of the economy.

The government must exhibit discipline. It must cut down decisively on governance costs, cut the appetite for loans and encourage productivity. It must show that it wants to really revamp the economy and therefore be in a position to save the naira. For now, no serious person would take the government and the naira seriously.

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