Nigeria’s currency, the naira, will keep falling as long as the government’s policies fail to revive the country’s economy and crude oil production remains in a terrible situation.\
Before the end of the year, analysts and economists who spoke with News Direct on Thursday said there was a chance the dollar may exchange for as much as N1000.
They asserted that further factors contributing to the problem include a lack of direct foreign investment into the nation, high oil theft, soaring fuel subsidies that continue to harm the economy, and FX speculation by currency dealers.
The occurrence occurs against a background of what appears to be unchecked borrowing and escalating debt payment costs, which in the first quarter (Q1) of 2022 exceeded the nation’s revenues by as much as N310 billion and are still rising.
After closing the previous day at N710 to the dollar, the naira slid to N730/$1 on the black market on Thursday.
On the black market, the naira’s value relative to the dollar has dropped over the last few days.
The naira has dropped to a record low of N730/$1 on the black market as a result of Nigeria’s inability to benefit from increased oil prices due to widespread oil theft and other factors.
With mounting debt service expenses, fuel subsidy payments that, by all indications, may surpass the projected N4 trillion this year, and a significant depletion on its Excess Crude Account, Nigeria is currently experiencing an economic crisis (ECA).
If the nation votes to stick with the divisive policy, the Federal Government predicts that petrol subsidies will increase to N6.72 trillion in 2023.
According to data, fuel subsidy payments totaled N210.38 billion, N219.78 billion, and N245.77 billion in January, February, and March 2022, respectively. In April and May 2022, Nigeria spent N271 billion and N327.07 billion, respectively, to make up for the shortfall caused by the importation of fuel.
An additional analysis of the subsidy claims revealed that N263.95 billion from May 2022 subsidy outstanding, including N501.30 billion for the current month’s subsidy cost, and N564.65 billion from the previous month’s unrecovered value gap were carried forward.
The value deficiency totaled N1.32 trillion over the time period.
A balance of N1.01 trillion remained after the NNPC withdrew N319.18 billion from the federation account, which had to be carried forward and recovered from July revenues that were due in August.
In addition to not knowing its precise daily fuel use, Nigeria is thought to be subsidizing its neighbors as a result of the arbitrage that its subsidy has created.
The naira will continue to lose value unless Nigeria starts to draw in foreign investment and its manufacturers can export, according to economist Stephen Iloba of Lagos.
“There is the fear that the dollar will exchange for N1000 before the end of the year if concerted efforts are not made to ensure we diversify the economy and encourage exportation. If we rely on oil, we will not get out of this situation anytime soon.
We need to encourage exportation in the non-oil sector.” Managing Director, Cowry Assets, Johnson Chukwu, disagreed with insinuation that dollarisation of the political space is responsible for dollar scarcity. He said, “It is not politics that is driving it.
It is demand and supply. We have mismanaged the economy and we are not earning foreign exchange.
He said, “It is appalling that at a time like this, we are not producing crude when we should be producing. Every other country producing crude is currently enjoying it.
The question we should ask is how you can be in a group where your members are celebrating and you are crying.
It means something is wrong with you.” Chief Executive Officer, Economic Associates, Dr. Ayo Teriba, gave his opinion on how to stabilise the naira.
He said: “The exchange rate is a mere indicator of the balance of supply and demand forces in the foreign exchange market.
Those who are discussing exchange rate developments without reference to the unfolding realities of demand and supply are chasing the shadows instead of substance.”
Cyril Ampka, an economist with a base in Abuja, believes that depreciation is a preferable option for a country’s currency.
Devaluation improves the export competitiveness of a net exporting nation, boosts export earnings, and puts more money in the hands of the populace.
He said, “A very good example of a country that has benefited from this is China, which is the largest trade nation in terms of the sum of its exports and imports.
“For a net importing country like Nigeria, however, devaluation will help increase revenue but in turn, reduce purchasing power.