Wednesday saw a further decline in the value of the naira as it fluctuated between 1,005 and 1,025 to the dollar in the parallel market.
Small business owners take
Small business owners, representatives of the Nigeria Employers’ Consultative Association, and manufacturers who spoke with JerryMusa.com voiced worry about the naira’s declining value and warned that it would result in the closure of companies and the ensuing loss of jobs.
Since the Central Bank of Nigeria permitted the naira to freely fluctuate against the dollar and other major world currencies in June, the national currency has continued to decline.
As a result of this drop, manufacturers are now having a harder time obtaining raw materials, and more businesses are preparing to lay off workers or close down.
Manufacturers forced to reduce production
Manufacturers are forced to reduce production, employment, and raw material imports as a result of the weakening naira.
Our correspondent was able to speak with Bureau de Change employees who reported that on Wednesday, the naira fluctuated between 1,005 and 1,015 to the dollar in the parallel market.
Yusuf Kareem, a BDC operator in Lagos, told one of our reporters, “We bought for N1,005/$ and sold for N1,015/$ on wednesday. Money is still in short supply. The naira’s value has been declining.
BDC operators also lamented
Musa Yunus, a different BDC operator in Lagos, stated: “The naira was traded at 980/$ two weeks ago, but it is now 1,020/$. Due to the fact that it hasn’t been falling, we are unsure of what will occur tomorrow.
Idris, a different BDC operator in Lagos, stated, “I am not sure you can buy up to $1,000 from me currently because it is not available. We purchase at a rate of $1,000 per dollar, but I sell at $1,015.
A second BDC in Lagos, Babangida, stated, “I sell for N1,010 per dollar and buy at the rate of N1,000.” The rate, according to Assistant Provost Muhammed Nera of the Association of Bureau De Change Operators in Zone 4, Wuse, Abuja, closed at 1,015/$ on wednesday.
FX crisis may kill many industries
“As of business close, we were buying at N1,010/$ and selling at N1,015/$,” he said. However, I am unable to predict the rates for tomorrow (today).
Official data from the FMDQ revealed that the naira decreased slightly and finished at 765.83/$ on Wednesday from 765.02/$ on Monday in the Investors & Exporters FX window. The official market reported a $60.30 million total turnover.
The FX crisis, according to Dr. Solomon Aderoju, chairman of the Nigerian Association of Small and Medium Enterprises, South-West, will kill out several industries.
Rising cost of production
He claims that the rising cost of production is a result of the naira’s declining value. He said, “The SMEs would not be able to sell when they create because people’s purchasing power is declining and they are not buying.
“Some of us will be unable to fulfill our obligations after borrowing money from the bank. It’s a complicated issue. They won’t be able to pay the debts back. Some of us import our raw materials from other nations; thus, raw material costs will also be rising. These issues will destroy SMEs.
Many firms have already shut down as I write this due to these issues. He continued by saying that firms were also dealing with other issues, such as increasing fuel prices.
Price of fuel also adds to the burnt
“The issue extends beyond this. Additionally, there is the price of fuel and other problems we face, such as our product’s poor marketability.
In Nigeria, foreign items compete with locally produced goods. Since some of these products are even lower quality than ours, there is no way to compare them, despite the fact that they are more affordable.
And that’s why the African Continental Free Trade Agreement, which previous President Buhari signed, is causing us anxiety. If we can conduct business without borders, other nations will be able to export goods that are less expensive than our own, he continued.
Affects of the depreciating Naira
Mr. Niyi Yusuf, the chairman of the Nigerian Economic Summit Group, listed some significant effects of the depreciating naira.
“This will increase imported inflation as the cost of imported goods rises, and it will also increase exporters’ naira-denominated income,” he said.
“The net result will be favorable if we export more than we import. In the medium term, high import prices may also help to restrain demand for some imported goods.
How would government handle this
Also addressing this, Mr. Adewale Oyerinde, Director-General of the Nigeria Employers’ Consultative Association, emphasized that the main concern should be how the government would handle the difficulties associated with foreign exchange.
According to Oyerinde, the current FX crisis is making it difficult to obtain crucial inputs and is interfering with our financial plans. Progress is being hampered by the growing FX problem, which must be addressed before our efforts can succeed.
However, Dr. Ikenna Nwaosu, a facilitator with the Nigeria Economic Summit Group, claimed that many businesses would close as a result of this.
It may result in closure of several businesses
He predicted that it would result in the closure of certain businesses. First of all, they will incur losses if their manufacturing costs and the cost of their raw materials reach a particular point and they are unable to sell their finished goods because the market won’t accept a specific price.
There will be a huge reduction in production, which means unemployment, possibly temporary unemployment. They might shut down for a while, which would have a snowball effect.
Due to the Federal Government’s closure of all special foreign exchange windows, businesses will be forced to close. Finally, because there is no specific window for students traveling abroad, it will have an influence on the educational sector.
Dollar price may impact cost of petroleum
The general market has replaced the special window where they previously made purchases. Nwaosu bemoaned the fact that the steady increase in the value of the dollar would raise the cost of petroleum due to its purchasing power.
The price of gasoline would increase due to the expense of obtaining it, he predicted, and that will be the first thing we hear. Second, the Nigeria Customs Service will use a higher exchange rate to determine import charges.
It will increase once more, which will result in an increase in import duty. Ultimately, the price increase is passed on to the final customer. It will also increase inflation, and as a result of rising import taxes and fuel prices, food prices will also rise.
Minimum will be subject to tougher negotiation
And it implies that the minimum wage would be subject to tougher negotiation. According to the Nigeria Labour Congress, the minimum salary is N200,000. What will happen if the currency continues to be this way?
The main effects of this high dollar rate are thus: My recommendation is for the CBN to step in directly. We disagree with the president’s directive to the CBN to relinquish control and allow market intervention to take hold. Mind you, the Middle East conflict will make our high dollar rate worse.
Mr. Pius Ujubuonu, a leader of the Association of Nigerian Licensed Customs Agents, declared that the systems were already paralyzed, particularly in the area of freight forwarding, which includes seaports, land borders, and airports.
It may affect import
The amount we used to pay, let’s say N2 million, has increased to N7 million, which is unhealthy and hurting businesses. I doubt there will be any imports in the upcoming months, and many cargoes will be abandoned if this trend continues.
The use of the dollar and other foreign currencies as legal money for domestic transactions in Nigeria is under investigation, according to a Tuesday directive from the House of Representatives to the Committee on Banking Regulation.
Additionally, it urged the CBN to implement monetary policy changes to stabilize the naira, address speculative activities on the forex market, and raise the naira withdrawal limit to lessen the pressure on dollars and other foreign currencies in order to address the effects of the weak naira relative to the dollar and other currencies.
FG to make structural changes
It further encouraged the Federal Government to develop structural changes and strategies to fight corruption and advance the nation’s economy’s diversification.
The motion was made on Tuesday during plenary by Ismail Dabo (APC, Bauchi) to investigate the usage of the dollar and other foreign currencies in Nigeria as legal money for domestic transactions.
The member who proposed the motion claimed that the lack of foreign exchange is the reason why the naira has continued to depreciate against major currencies since President Bola Tinubu announced Nigeria’s unity.
Naira may decline even more
According to Dabo, the failure of the nation to acquire enough foreign currency could cause the naira to decline even more and result in unmanageable inflation. He pointed out that the country’s capacity to generate foreign cash had been further diminished by oil theft.
“The president intends to let the market determine the value of the naira, but the worrisome exchange rate has affected Nigeria’s economy and caused immense pain due to a rise in the demand for dollars and a decline in the supply of dollars.
Oil, the backbone of the nation’s economy, accounts for almost 90% of Nigeria’s total export revenues. However, changes in the price of oil throughout the world have a significant impact on the country’s foreign exchange market. This explains why the naira has kept losing value, the speaker remarked.
External debt may be affected
“A weaker and declining naira could increase Nigeria’s costs of servicing its external debt, potentially reducing government spending on crucial areas like healthcare and education,” Mr. Dabo continued.
Ademorin Kuye (APC, Lagos), who contributed to the motion, argued that the CBN must address the naira’s depreciation while cracking down on domestic dollar use.
He claimed that the majority of foreign airlines want payment in dollars for tickets and that real estate businesses likewise require dollars as a form of payment.
Foreign Airline charge in dollars
“Today, you must pay in dollars if you wish to fly with a foreign airline. They charge you money in several high-end markets, particularly real estate. This is unlawful,” Mr. Kuye declared.
Bamidele Salam (PDP, Osun), who spoke in favor of the motion as well, pointed out that the CBN’s new management team hasn’t offered any guidance on policy since being confirmed by the Senate.
“The management has since been confirmed, but we have not heard a policy statement from him, and the market reacts to policy statements,” he claimed.
FG to increase confident of foreign investors
Punch reports that the House additionally asked the Federal Government to increase the confidence of foreign investors in its fiscal and monetary policies in order to stimulate exportation and decrease imports.
It instructed the National Security and Intelligence Committee and the Committee on Banking Regulations to communicate with the Central Bank of Nigeria in order to launch compliance efforts.