Lagos/Abuja Ã¢â‚¬â€ Now that the naira has depreciated so much, it is the less privileged, importers and the manufacturing sector that will suffer
“The Indomie carton I used to buy for N1,800 suddenly rose to N2,000. Turkey Vegetable oil moved from N1,300 to N1,500. My babies food, the cerelac i used to buy for N1,100 went up to N1,300. This is too much. And with Christmas not far away, cost of essential commodities will rise the more. Many are talking about increase in wage forgetting that many of us have no jobs.” These were the words of a frustrated housewife in Abuja, Mrs Doobee Jackson.
Signs of imminent devaluation of the naira emerged last Monday when the currency traded at N164.30 to the dollar outside the Central Bank of Nigeria (CBN)’s bond of N150 plus or minus three percent.
Observers say the value of the nation’s currency would further depreciate against the dollar as days roll by due to current inflationary trend in the economy.
At a forum in March this year, Governor of CBN, Malam Sanusi Lamido Sanusi had said that the apex bank would not allow the naira to depreciate. But realities on ground contradict his position.
“The exchange rate to us seems to be far more important for price stability than interest rates. With local farm produce, fuel and imported food making up more than 70 percent of the inflation index, borrowing costs have a limited impact on prices,” Sanusi stated.
He added, “If I devalue the naira by 20 or 30 percent, it wouldn’t make textile products in Nigeria cheaper than imports from China because it doesn’t fix the power problem or infrastructure problems. The exchange rate cannot continue to be the whipping boy and carry the burden of wrong economic policies.”
Today, Sanusi’s position on the naira has been defeated while the currency has continually been dwindling to the detriment of the economy.
Observers say the economic implication of the dwindling fortune of the naira cannot be over-emphasised when measured against soaring inflationary rate in the country. According to them, the current fall of the naira against the dollar has far-reaching implications on the Nigerian economy.
Dr. Mike Ola Adebayo, an importer and General Manager of Haffar Industrial Company Limited told our correspondent that the dwindling fortune of the nation’s currency is a direct invitation to hunger and penury in Nigeria. “The fall of the naira will create more poverty in the country. The poor will suffer more,” he stressed.
According to him, the changing fortune of the currency should be blamed on the CBN’s monetary policy which gives room for allocating money to bureau the change operators. He said the development automatically creates leakages, encourages smuggling and strangulates the manufacturing sector of the economy. He said the concomitant effect of this is the growing unemployment in the land because some manufacturers would rightsize their workforce in order to break even.
Former president of the Association of National Accountants of Nigeria (ANAN), Dr. Samuel Nzekwe said the changing fortunes of the naira should be blamed on the unwholesome practices in the banking system called roundtripping. He said the practice starved the nation’s currency of its value. He also said the productive sector would suffer more due to the dwindling value of the naira.
According to the President of Lagos Chamber of Commerce and Industry, Chief Femi Deru, the continued depreciation of the naira is worrisome adding that it can hinder government’s transformation agenda. He explained that moves by the federal government to remove fuel subsidy from next year had led to panic buying of dollars by some industrialists.
He said many industrialists wanted to import raw materials and machines to beat higher prices of raw materials that could follow the removal of fuel subsidy, stressing that the development negatively affects cost of production.
The president of Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Dr. Herbert Ajayi believes that the devaluation of the naira would jerk up the cost of importing machines and raw materials into the country.
Ajayi, who predicted that the value of the naira might further depreciate to N200 to the dollar, stated that the development can castrate the state of the industrial sector which may result in exodus of companies out of Nigeria
A foremost industrialist and former chairman of National Association of Small Scale Industrialists (NASSI) Duro Kuteyi said the naira fall will have a terrible effect on the economy.
According to him, small businesses in the country are not spared of the consequences of the naira slide as those who secured loans from banks to procure equipment will automatically request for additional facility.
Dr. Boniface Chizea, Principal Consultant of BIC Consulting said as a factor cost, the depreciation of the naira implies that it will cost more for economic agents to import goods and services adding that this has a direct knock effect on the price level.
He explained, “What this translates into is increased inflationary spiral with all the untoward effect of such a development for the economy. Heightened inflation increases the poverty index as the marginalised and the down trodden who are not in a position to pass on the effect of price increases are the worse off in such a situation. Those in paid employment also suffer. Even in economies where the salaries and wages are index linked there is always a lag before adjustments are made.”
On how to reverse the trend, Adebayo said CBN should stop the practice of allocating funds to bureau the change in the country. Nzekwe said CBN should reduce Monetary Policy Rates so as to reduce the burgeoning effect of inflation. According to him, there must be conscious efforts to invest heavily into productive sector.
Towards reducing cost
Meanwhile, Minister of Finance and Co-ordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, has ordered the withdrawal of eight agencies operating in the nation’s ports, saying the number should be pruned from 14 to six with immediate effect.
She took this decision last week when she inspected APM Terminals Apapa Limited in Lagos.
The reduction of the eight government agencies from the ports may force down prices of goods and services in the country by up to 20-30 percent, the president of the Licensed Customs Agents of Nigeria Alhaji Shittu reacted quickly.
In the same vein, the federal government in collaboration with the top management of Nigeria Customs Service (NCS), disbanded the Customs Task Force and abolished the cargo tracking note (CTN), saying that operations at the nation’s ports must be streamlined to enhance efficiency and reduce cost as obtained in developed economies.
Okonjo-Iweala listed Nigerian Maritime and Safety Agency (NIMASA), NCS, ports health, immigration, police and state security services (SSS) as the agencies authorized by government to operate at the ports. “The (other) agencies must withdraw from the ports within two weeks.
She disclosed that this is geared towards implementing the “action of government on its medium and long term development. We must stop the extortion and corruption prevalent in the port. We are going to reduce the check points to reduce the cost of doing business in order to achieve faster turnaround time.”
Shittu said, “the business of clearing goods from the nation’s ports will now ease up and the costs that go with having to deal with all those agencies that only ultimately become transferred to the end user of these goods are now reduced.