In a dramatic slump that got the Nigerian masses gasping for breath from choking inflation since June 1, 2023, Nigeria’s currency, the Naira has been made to become the number two weakest currency in the world after its exchange for one dollar rises to as high as N1,000
By Udoka Ekeleme, Abuja
The Ugandan Shelling ranks number 10 amongst weakest currencies in the world. Ugandan Shelling (UGX) exchanges a whopping UGX 3,741 to one dollar at the time of filing this report.
Uganda, as with Nigeria is an oil, gold and coffee -rich country. The factors responsible for the failure of the UGX and the entire Ugandan economy are similar to those responsible for Nigeria’s naira failure and the near collapse of the country’s economy namely; a record of unstable economic growth, sizeable debt and political unrest.
The American Central Intelligence Agency (CIA) had been quoted to have said that Uganda faced numerous political and economic challenges that could affect its future stability including explosive population growth, power and infrastructure constraints, corruption, underdeveloped political institutions and human rights abuses.
The case of Uganda is similar to Nigeria’s in every facet. After President Bola Ahmed Tinubu removed the contentious fuel subsidy in May 29, 2023, and subsequently devalued the naira, the currency, Naira, has been battling for survival with its exchange rate to dollar rising to over N1,000 for one dollar at the parallel market.
More harm to the Naira is the bitter truth that the dollar has become and remained the underground currency of the Nigerian economy, according to financial experts. These experts have also cautioned the government of Tinubu to work hard to stop the dollarisation of Nigeria and work aggressively on the nation’s exports, as well as arresting the criminality called round tripping.
The devaluation of Naira, apart from having reduced the purchasing power of the average Nigerian, thereby increasing abject poverty in the land, many expert said that Naira would depreciate to lower than N1,500/$1 in first quarter of 2024. In the event of this possible further collapse of the Naira, experts said it would reduce the Nigerian currency lower on the ignominious list of weak currencies in the world. Nigeria’s currency, in the estimation of the financial analysts, would be required to be carried in sacks if they want to buy any valuable items.
As the Naira collapse continues without abating, the brouhaha that has surrounded President Bola Tinubu’s Chicago State University’s certificate scandal is about to bury the Naira as feelers from the international community indicate that potential investors are extremely cautious of coming to Nigeria to do business because many of them are said to be afraid of what would become the end of the certificates forgery scandal.
A financial analyst, Victor Chiazor, who is the Head of Research and Investment at FSL Securities Limited, said, “With regards to the economy at large, economic activity level is expected to remain muted as individuals and businesses continue to struggle with higher cost of living and operations”.
Another analyst said that in the banking sector, the banks that are making FOREX gains as a result of the Naira devaluation will continue making more gain as the Naira continues to devalue, thus bringing uncertainty to the economy.
For Tajudeen Olayinka the CEO of Wyoming Capital and Partners, “So long as we continue to have dollar liquidity challenge, so long we shall continue to see Naira depreciation and assets and liabilities revaluation difficulties among Nigerian businesses”.
Olayinka said it was imperative that the government should work through possible solutions to restore external sector equilibrium and dollar liquidity.
He advised Federal Government to step up its ongoing reforms in order to stabilize the value of the Nigerian currency. He also advised the Central Bank of Nigeria (CBN) to allow exchange rates to converge by removing the well known source of divergence which he said are the 43 items on the list of FOREX restriction. He said the action may restore liquidity to the official FOREX market.