The Demise Of Naira – Foundation Built On Shifting Sand


“… 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

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.

Written by Emeka   Chiakwelu , Principal Policy Strategist at AFRIPOL. His works have   appeared in Wall Street Journal, Huffington Post, Forbes and many other   impo rtant journals around the world.

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