The Demise Of Naira – Foundation Built On Shifting Sand – By Emeka Chiakwelu

“… Likened unto a foolish man, which built his house upon the sand: And

the rain descended, and the floods came, and the winds blew, and beat upon

that house; and it fell: and great was the fall of it.” -Matthew 7:27

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By now we all know the story of naira, the value is precipitously

collapsing and its malleability threaten the dwindling Nigeria’s economy.

To be candid, there is no need to beat around the bush; the whole truth is

that the future of naira as a principally medium of exchange is very

bleak, if not in doubt.

The implication is not that Nigeria’s reserve bank will abandon naira as

an operating currency and come up with another currency with a new

nomenclature and different denominations. Not in affirmative, the

mechanics of operation of a prevailing currency is its acceptability. As

the participating marketers in a base monetary market losses interest in a

given currency, then its function as an instrument for business

transaction will be dramatically diminished. This episode will open door

to the introduction of foreign currencies in a local transactions.

In this case, international currencies specifically dollars and pounds

will displaced local naira in trading, commercialization and transaction

on consumer market level. This scenario has already started happening with

naira. Nigerians are now more interested in dollars than in naira. Even

using dollar as an indicator to measure and deduce the price and value of

a commodity in the supposedly naira dominated sphere. This implies that

dollars and pounds are acting as a’ gold reserve’ for naira.

IMF and international financial bodies have eclipsed Nigerian policy

makers in regulation of naira without signing any official or binding

document to do so.. Never minding Nigeria refusal to officially devalue

naira as instructed by IMf, the devaluation is already taken place without

the clueless and un- sophisticated Nigerian government being aware. The

true value of naira is at the second tier market where is above 350 to US

dollar and maybe be acceralating to 500 in nearest future.

Nigeria has finally loses the power and control over the value of naira.

Nigeria has handed the power to control naira to foreign occupiers namely

dollars, pounds, yens etc by default and poor management without not being

aware. The policy makers have no more control over naira because the

monetary tools at their disposal have waned and lost its functionality.

The tightened of monetary tools with application of complementary monetary

and fiscal policies cannot cut the deal because the environment is not

conducive for the policies to bear fruits.

First and foremost the aggressive speculators have smell weakness and are

having a field day with porous bulwark around naira terrain. The falling

price of oil is the new normal and nosedive of the demand has triggered

over supply and oil glut. As a result of this, the country’s foreign

reserve is not replenishing but continues to diminish. The dependence on

oil as major source of foreign exchange has destroyed naira and

buttressed the inefficiency and paucity of financial wisdom among the

country’s leadership class..

Now the party is over in Nigeria, the enormous revenue generated from oil

export was not prudently invested in the country. With dilapidated and

scanty infrastructures, poor roads, inadequate electricity and dirty

drinking water the country’s economic future is bleak.

The anemic GDP growth of less than 3 percent and with dwindling foreign

reserve at $28 billion and untrained workforce do not spell like a serious

nation that is ready for the daunting challenges of 21st century. The

country economic and financial indices are whipping up the rapid decline

of naira. With interest rate at 11percent, inflation rate @9.6 percent the

naira with limited war chest to vend-off speculators is suffering because

Nigeria has few products to export for generation of sizeable foreign

exchange.

Nigeria built her naira and economy on a soft soil, shifting sand and

without solid foundation. Ultimately with permeating corruption,

instability, miscalculation of priority and mediocrity it has commenced to

manifest in the lethargy of the economy that has threaten the survival of

naira.

–

Emeka Chiakwelu, Principal Policy Strategist at AFRIPOL. His works have

appeared in Wall Street Journal, Huffington Post, Forbes and many other

important journals around the world. His writings have also been cited in

many economic books, publications and many institutions of higher learning

including tagteam Harvard Education. Africa Political & Economic Strategic

Center (AFRIPOL) is foremost a public policy center whose fundamental

objective is to broaden the parameters of public policy debates in Africa.

To advocate, promote and encourage free enterprise, democracy, sustainable

green environment, human rights, conflict resolutions, transparency and

probity in Africa. info@afripol.orgwww.afripol.org