Abuja – November 7, 2023 – Viewpoint Housing News.
The exchange rate between the Nigerian Naira (NGN) and the United States Dollar (USD) consistently captures attention and affects the daily lives of Nigerians. The Naira has faced depreciation against the Dollar in recent years, with the Dollar now exceeding a thousand Naira. This has raised concerns for both citizens and the government. In recent years, the Naira has been challenged, undergoing a series of depreciations against the US Dollar. The gravity of this situation has triggered concerns about its aftermath on the Nigerian economy, capturing the collective attention of citizens, the government, investors and international bodies. A weaker Naira erodes the country’s economic stability and can hinder foreign investment. This can result in reduced foreign capital inflow, hampering economic growth and development, and potentially undermining confidence in the Nigerian market for both local and foreign investors. The weakening Naira also erodes the purchasing power of the average citizen, leading to higher prices for imported goods like food, fuel, and medical supplies. This economic strain is now impacting household budgets, making it more difficult for people to cover their basic expenses. The situation we face today is not one that should be taken lightly. It is imperative to recognize that a mere conventional approach will not suffice in addressing the complexities of our economic landscape. The ascent of the U.S. Dollar and the concurrent inflationary pressures require a detailed, multifaceted response from our nation’s leadership. This article provides counsel to President Bola Ahmed Tinubu, CBN Governor, Olayemi Michael Cardoso, and pertinent authorities. It underscores that the economic recovery efforts may face limitations unless the persistent appreciation of the US Dollar and the ensuing price escalations, which impact individuals’ purchasing power, are addressed. In the quest to prevent the depreciation of the Naira, it is imperative that we embark on the critical task of demystifying the US Dollar. This process involves comprehensive efforts to understand, manage, and reduce the overwhelming reliance on the Dollar in our economic landscape. We must recognize that the world economy is ever evolving, and as such, our response to these challenges must be dynamic and adaptive. While we cannot fully control global factors that influence exchange rates and commodity prices, we have the power to implement effective domestic measures to mitigate their adverse effects. In addressing the rise of the US Dollar in foreign economies, other countries have taken notable steps. The launch of the Euro in 1999 played a pivotal role, as it now accounts for 20% of global foreign exchange reserves. Additionally, the Asian Currency Unit emerged in the early 21st century, comprising 13 currencies from East Asian nations. These developments, coupled with the success of economic regionalization, were influenced by Western-led geopolitics and led to shifts in the dominance of the US Dollar in global finance. It is therefore incumbent upon us to consider a range of policy options, including diversification of our economy, fostering an environment conducive to local industries, and ensuring efficient and sustainable resource management. These steps will not only help stabilize the exchange rate but also bolster the resilience of our economy in the face of external pressures. It is imperative to note that different Nigerian presidents have faced the challenge of controlling the US Dollar’s rise at various points in the nation’s history. A notable example is during the tenure of President Muhammadu Buhari, who took office in 2015. His administration introduced several policies and measures to try to stabilize the exchange rate and reduce the Naira’s depreciation against the US Dollar. These efforts included capital controls, limiting access to foreign exchange, and promoting domestic production to reduce the country’s dependence on imported goods. However, the success of these policies and their impact on the exchange rate fluctuated over time. The World Bank’s guidance on reducing the dominance of the US Dollar in the Nigerian economy is to encourage and support measures that promote the use of the Nigerian Naira (NGN) and other local currencies in various economic transactions. By substituting the Dollar with the Naira or other local currencies for substantial transactions, Nigeria can bolster its own currency and diminish its reliance on the Dollar. This shift has the potential to enhance economic stability, grant better control over monetary policies, and instill greater trust in the local currency. It represents a significant stride toward attaining financial independence and nurturing a stronger economy. Ceasing large transactions in dollars is a necessary and enduring solution that means the local transaction should be allowed in Dollars there should be an Executive order against the domestication of the Dollars in Nigeria. By adopting this policy, the natural outcome will be a substantial decline in the value of the dollar as demand for will automatically decreases In response to the depreciating Naira, the government should also employ measures such as adjusting monetary policy, controlling access to foreign exchange, and implementing import restrictions. These actions are intended to stabilize the exchange rate and support the Naira. However, their success can vary. The prudent course of action is to eliminate the pervasive dollarization of the Nigerian economy, with particular emphasis on curbing large-scale transactions conducted in foreign currency. By shedding light on the complexities of the Dollar’s dominance, we can work to diversify our economy, boost domestic production, and reduce our vulnerability to external factors. Failure to take immediate measures to rectify this situation will have dire consequences, potentially pushing our economy to the brink of collapse, rendering it incapable of recovery through any means or strategies.