It has been a very interesting
two-three weeks in the financial sector in Nigeria and I intentionally chose to
watch and pray rather than rant and over analyze.
As expected, friends and
colleagues who were against this government were quick to call me and further
express disappointment at the present administration but like I always say, the
government is ours and cannot be without us. We are collectively responsible
for its success and existence.
The interplay between the naira
and dollar over the past weeks have simply been a practical illustration of the
law of demand and supply. The crashing
value of naira began during the 2015 presidential election when many people
were uncertain of what the outcome would be and as a result, investors pulled
out their investments. The new government came to power with the aim of
boosting the economy by encouraging the production and use of locally made
goods being the reason why avenues to discourage importation were put in place.
However, importers who needed
to keep up with their business, moved their foreign exchange demand to the
parallel market(black market) as an alternate means to the bottle neck of
accessing forex from the banks. The sudden increase in demand for dollar in the
parallel market over naira as expected mounted pressure on the naira being the
result of what has been playing out with the currency. It is very pertinent for
us to note however that the official rate of the naira as against dollar is
different from the rate in the parallel market. The official rate of naira to
dollar is 199.5 and has remained reasonably stable only for on the 31st
of January when it fell to 201 but has since regained its value.
It still surprises me when
I see people calling out for the government to devalue the currency and my
question remains “on what basis should this be done?” As far as I am concerned,
the naira has already been devalued by market forces and any further attempt to
devalue it officially will only bring about inflation and unnecessary hardship
to the citizens of Nigeria. If only we can support the call for
entrepreneurship and production and use of locally made goods, then the economy
will be great again.
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