“In place of gold and other economically known media of value preservation and storage, many Nigerian well-to-do members of the society now stock the dollar in their homes with intention to sell at higher rates in the future. Amidst these, there are yet another group of persons whose wages or stocks of trade are paid for in dollars”.
INTIMIDATING ‘PROFILE’ OF THE DOLLAR AND THE FX CHALLENGE
By: Augustine Omilo
The US dollar, the currency of the United States of America was first printed in 1862. Since then, the nation that prides herself as God’s own country has done everything possible to ensure, not only its stability in comparison with other currencies of the world but also maintain its status as the certified medium of exchange in international trade. When the value of USD fell to $2.6 per the British pounds sterling in 1972, the financial sector planners of the country got so “mad” that everything possible was done to ensure that the superiority contest between the dollar and the Great Britain’s currency was brought to a comparative equilibrium.
From then till date, the exchange rate of the American dollar to British pounds sterling has never exceeded $1.6/pounds sterling. That the official medium of exchange in Britain maintains a relatively higher value compared to the dollar is understandable. The United States of America was once a colony of the foremost European country.
In the case of Nigeria, she broke away from the same Britain in 1960 but continued to use the British pounds till thirteen years after independence. When the current currency, the NAIRA came into being in 1973, it was at par with the former colonial master’s pounds. It also exchanged with the dollar at the rate of 80k to one dollar. This means that at inception, the Nigerian money was stronger than that of the self acclaimed most powerful nation of the world. This continued with minimal alterations till when President Ibrahim Badamasi Babangida introduced the “Dutch auction” system of obtaining foreign exchange from the Central Bank of Nigeria, CBN.
Babangida is not an economist. He probably acted in line with the recommendations of the International Monetary Fund, IMF which offered itself as an agency interested in helping the country (Nigeria) overcome her economic challenges at the time. The military leader employed the services of renowned economists “imported” from the World Bank and IMF. They included Dr. Onalapo Soleye, Dr. Kalu Idika Kalu and Dr. Chu S.P Okongwu.
This method of obtaining FX from the CBN by individuals, companies, and other organizations through the Deposit Money Banks signaled the continued downward trend in the value of the nation’s medium of exchange. Corruption came also with this. Unscrupulous banks and their officials started surviving big merely by buying and selling dollar and other foreign currencies. In addition to these, Bureau De change was introduced as one of the official means of getting access to foreign currencies. And this worsened the “FX distribution” scenario. Today, many privileged Nigerians rather keep their liquid assets in dollars rather than in form of Naira. This has erroneously made the American currency a preferred medium of exchange in the world’s most populous black nation.
To make the matter more worrisome, the country’s men and women abandoned the production of goods and services in preference for the importation for fast profit-yielding foreign goods often stocked in supermarkets across the country. Even those that are involved in the importation of these supermarkets’ items and the consumers seem not to believe they are part of the problem.
In place of gold and other economically known media of value preservation and storage, many Nigerian well-to-do members of the society now stock the dollar in their homes with intention to sell at higher rates in the future. Amidst these, there are yet another group of persons whose wages or stocks of trade are paid for in dollars.
The 2024 budget estimate of Nigeria as usual was premised on N700/$ rate. The National Assembly is already working on its passage into law with effect from January first. Meanwhile, the American currency presently exchanges for about N800/$ at Importer and exporter window (official rate). At Bureau De Change, it goes for as high as N1, 240 per dollar. Unless urgent steps are taken to avert the pending failure likely to arise from the unrealistic reliance on the fiscal plans to drive Tinubu’s renewed hope for Nigeria agenda, the people’s desire to return to economic state of competition with the rest of the world will end up as a nightmare.
While Nigerians are worried that the country is battling with international debts running into billions of dollars, a new dimension was added to the nation’s debt portfolio. This appears to have further improved the towering “profile’’ of the USD. As was recently reported, the Central Bank of Nigeria (the supposed banker to other banks) presently owes the commercial banks a whopping sum of $10m. This is still pending. Watchers of the economy hold the view that the deficit in the FX supply is substantially caused by this.
Speaking in recent conference put together by the Nigeria Economic Submit Group (NESG), the minister of finance and the coordinating minister of the economy, Mr. Wale Edun assured the citizens that the federal government is about to raise $10b to resolve the foreign exchanged crisis faced by the government.
The yet-to-be answered question remains; ‘is Wale Edun’s $10b bailout fund being sought-after meant to be used to offset the CBN’s obligation to Deposit Money Banks (DMBs) or add to the nation’s international trade shortfall? Before the answer comes, one cannot but give thumb-up to the Americans and their leaders who have ensured that the dollar maintains its leading currency profile despite the numerous wars that have been fought by them. For Nigeria, urgent steps must be taken to mop up all the dollars circulating in the country.