For months, the naira has been suffering against other currencies in the international exchange market. However, there has been consistency from September 2021 until the present, as the local currency hasn’t experienced any dramatic falls or rises within that period.
As at September 13, the Pounds Sterling sat at N568 per pound. However, as at 8th November 2021 the value of the Naira against the Pounds Sterling had risen to N556 per pound. The highest which the Naira had been against the Pounds Sterling during that period was N552 on September 30, but that rise is still a general improvement on the previous value recorded on September 13.
Generally, currencies fall against one another when the demand for the currency does not match the supply of paired or counterpart currency. The naira has faced a long slump against the dollar, which was aided by the decision to stop selling foreign exchange to Bureau de Change Operators (BDCs). The decision was announced by the CBN governor, Godwin Emefiele at the last Monetary Policy Committee meeting.
The slump of the naira against the dollar is so bad that the currency fell to N570/$1 at the black market. However, as at November 5, 2021, the dollar stood at N411/$1 on the official exchange rate. This was slightly lower than the average of N410/$1 which was seen on September 13, 2021.
Dr Omobola Adu, a research analyst at GDL agreed that the BDC ban had a large part to play in the fall of the naira. A point was also made by Dumebi Udegbunam, a fixed income trader at UBA, that the demand for the dollar outweighed the supply of the currency, giving several individuals (hoarders and pure speculators) room to take advantage of the situation. This resulted in a 48-year high in the exchange rate at the parallel market (N570/$1).
The dollar is a universal force to be reckoned with, and a lasting solution to the fall of the naira against most strong, foreign currencies would be to make the naira another force to be reckoned with globally. As it stands, Nigeria relies heavily on importation of goods; some of these goods can be produced locally. If the reliance on importation continues without a view to at least improve the export aspect of the country’s economy – making the naira globally recognized – a potential solution to the problems will be suppressed.
