The launch of the e-Naira by President Muhammadu Buhari recently has made Nigeria to join the league of countries with electronic currencies. This is a welcome development. As stated by Mr President during the launch, the e-Naira will boost the country’s GDP by $29 billion in the next 10 years and attract more investment.
However, the launch of the e-Naira coincided with the country’s tumultuous or worsening economy with the free fall of the Naira, chasing few available goods. The e-Naira has also come at a time when the per capita income of the country has remained the same since 1981, according to the World Bank country’s director.
While e-Naira will curb illicit financial transaction and boost the financial sector, the Central Bank of Nigeria, CBN, did not explain to Nigerians whether the newly floated currency(e-#) will strengthen our fast crashing physical Naira with exchange rate hovering around N507/$1 or not.
Although, I am not an economist, but the continued depreciation of the Naira amidst hyper-inflation in the country should worry every Nigerian. The question begging for answer remains: is the e-Naira going to aid our weak and devalued currency, make it strong and stable? There are many factors believed to have caused the depreciation of the Naira. These factors include political instability; the terrorism in the North-east, banditry and other crises coupled with erratic power supply have driven our foreign investors away. Investors from foreign countries look for stable countries with strong economic performance to invest their capital. If the foreign investors will settle in Nigeria, they will have to trade in our local currencies. Which means they will have to buy the Naira with their dollars and in turn increase the value of the Naira. What about importation and exportation? This is another factor. Nigeria imports anything possible to the country which increases the demand for dollars and then depreciation of the Naira. Higher importation and lower exportation is not good for any economy, Nigeria inclusive.
The free fall of oil price is another factor that continues to cause the depreciation of the Naira. Nigeria depends largely on revenue generated from crude oil. Our economy is affected anytime there is a fall in oil price from oil exportation. This alone shapes Nigeria’s exchange rate. Naira to dollar exchange rate is highly affected by the fluctuation of oil prices in the world market. Other dollar to naira exchange rate influencing factors are: government policy, Nigerians’ obsession with foreign products, inflation, high public debt and current account deficit. Although, the CBN, through its monetary policies, is trying to normalise the exchange rate of the Nigerian Naira and other currencies, there is the need for a paradigm shift from the country’s oil dependent economy to other non-oil sectors.
If the country can diversify and develop its agriculture sector again, IT industries and chemical industries to a major sector managed by the federal government, there is high probability that inflation will reduce and the dollar-naira exchange rate will be more favourable to an average Nigerian.
Ibrahim Mustapha,Pambegua, Kaduna state08169056963