Naira-Dollar Exchange Rate

By Zayyad I. Muhammad 

The Central Bank of Nigeria (CBN) has been in the news for both good and bad reasons since President Bola Ahmed Tinubu’s administration was inaugurated a little more than a year ago.

From Godwin Emefiele’s dismissal and subsequent arrest to the unprecedented devaluation of the Naira, the controversial transfer of staff from Abuja to Lagos, the firing of 26 out of 29 directors, the revelation of the theft of $6.3 million from the CBN vault during Emefiele’s tenure, and the intense pressure on the Olayemi Cardoso-led management to restore normalcy, the CBN has never faced such a tense and tumultuous period in recent memory.

Who is to blame? The CBN Governor, Olayemi Cardoso, and his four deputy governors? President Tinubu’s sudden decision to float the Naira? Emefiele’s evident recklessness and partisan politics? Or the entire political and economic system

Cardoso and his four deputies have résumés and experience comparable to professionals worldwide. However, critics argue that, despite his experience as a commercial banker, Cardoso lacks the expertise of a central banker. They also contend that his previous role as Tinubu’s commissioner for Economic Planning and Budget could influence his performance, suggesting he might view the CBN Governor’s position as merely a form of patronage.

The CBN reached its lowest point during the Emefiele era when its regulatory and stabilizing functions became intertwined with politics and business interests. Court documents revealed that on February 8, 2023, four individuals stole $6,230,000 in cash from the CBN. Additionally, the Federal High Court in Lagos recently ordered the final forfeiture of properties valued at N12.18 billion linked to Godwin Emefiele.

The developments (above) indicate that Emefiele’s successor will encounter significant challenges. Nevertheless, the primary role of a central banker is to ensure stability during crises, focusing not only on critiquing past actions but also on delivering effective results that positively impact the economy and its citizens.

Cardoso and his team are currently grappling with several challenges: the instability of the Naira, public perception of the CBN, and widespread belief that Bureaux De Change operators wield undue influence, while the CBN has struggled to establish a mutually beneficial operating framework with them. The reality is that Cardoso’s ‘by-the-book’ approaches have not yielded [the] desired results. Although the CBN has managed to achieve some consistency in forex supply and clear the backlog of dollars owed to airlines and other foreign investors, the transfer of staff to the Lagos office and the dismissal of 25 out of 29 directors and additional staff must be considered in the context of policies initiated as far back as the reign of Lamido Sanusi.

Regarding dismissing directors and senior staff, how can Cardoso be expected to work effectively with individuals deeply influenced by Emefiele’s actions? Even in the military, police, and paramilitary forces, such restructuring is not uncommon, where hundreds of generals can be retired simultaneously, and the world moves on.

It’s also important to commend Cardoso and his team’s collaboration with the Nigeria Economic Summit Group (NESG) and other stakeholders to enhance the business environment. Such efforts are crucial for the CBN to build trust, ensure price stability, and implement effective monetary policies that prevent economic instability and improve foreign exchange rates and inflation.

On the other hand, why hasn’t the CBN been able to restore the Naira to its actual value against the dollar? The biggest mistake we make in Nigeria is sometimes applying global theories and laws to our unique system, which operates differently from other countries. These theories and laws succeed elsewhere because they strictly adhere to the principles and standards that support their effectiveness. However, CBN’s attempts to elevate the Naira to its expected value have consistently defied conventional economic laws and theories.

Cardoso and his team should consider adopting a strategy that combines established economic laws and theories with innovative approaches. One of their critical assets could be neighbouring countries such as Cameroon, Chad, Republic of Benin, Equatorial Guinea, and Niger Republic, along with other West and Central African nations, as well as Nigeria’s agriculture and manufacturing sectors. These countries import significant quantities of agricultural and manufactured goods from Nigeria, making them prime targets for the CBN’s efforts to strengthen the Naira.

A proactive step would involve the CBN collaborating extensively and effectively with governments of border states to establish well-structured international free-zone markets at border points. These markets would exclusively transact in Naira for all Nigerian products sold there. This approach could incentivize businesses from neighbouring countries to prefer purchasing goods in Naira due to its low-cost advantage, thereby increasing demand for the Naira.

Furthermore, the CBN must address one of its weakest points: inadequate public relations (PR). There is a pressing need to enhance its PR strategy because most of the public perceives the current CBN management as solely on a vendetta mission to discredit anything associated with Emefiele and engage in political maneuvering rather than recognizing its efforts to rectify systemic issues.

The Cardoso team must acknowledge that despite being a strategic institution, the CBN is susceptible to being viewed like any other Nigerian government entity. Therefore, the CBN must establish and maintain a robust PR program that informs the public about its activities and portrays the institution as independent from political influences despite being overseen by politicians.

Part of the CBN’s PR strategy should involve revitalizing and restructuring its commendable agricultural programs, which were previously undermined under Emefiele’s tenure. Cardoso should seize this opportunity to lead the relaunch of these programs and engage with the public to demonstrate his commitment as a genuine central banker, focused on economic stewardship rather than engaging in political vendettas.

Zayyad I. Muhammad writes from Abuja via zaymohd@yahoo.com.

By Jamilu M. Magaji 

Nigerians from all walks of life have been urged to embrace local productions with a view to tackling exchange rate volatility and promoting sustainable economic growth in the country. A professor of Financial Economics from Usmanu Danfodiyo University, Sokoto (UDUS), Prof. AU Sanda, made the call at Federal University Birnin Kebbi (FUBK) during the 21st Seminar titled “Exchange Rate Volatility in Nigeria: Lessons and Policy Implications,” on Tuesday.

The Seminar, chaired by Professor AS Mikailu, tripartite former Vice Chancellor of UDUS, Kaduna, and Nasarawa States Universities, was attended by members of academia, Ministries, Departments, and Agencies, as well as other public and private organizations.

Prof. Sanda, a first-class economist of high repute, highlighted a number of variables that appear to correlate well with exchange rate volatility, which include interest rate, money supply, inflation (foreign reserves and for an oil exporting country) and crude oil prices. He described the exchange rate as the price of local currency in exchange for a foreign currency, noting that it is also an important economic variable with huge potential to affect lives and livelihoods, as Nigeria’s recent experience has simply demonstrated.

“Interest rate hikes to tame inflation have been accompanied by a surge in money supply, rendering the initial policy to stymie inflation difficult to achieve, He said.”

He lamented that when inflation rises, a country’s currency will depreciate, as experienced in Nigeria when petrol prices rose in response to President Tinubu’s announcement on May 29, 2023, of his government’s plans to remove fuel subsidies. He stressed that foreign reserves, when they are buoyant, could strengthen a country’s currency, while for oil exporting countries, an increase in the crude oil price should help strengthen the currency as long as the foreign exchange management system allows some flexibility.

“If you are engaged in purchasing whatever goods from outside the shores of this country, be it furniture or whatever, then you are a party to this”. He said

“So, taming this menace is a collective responsibility from fiscal and monitory authorities down to the citizenry. We all have a role to play by at least embracing local productions, a key to sustainability and economic growth,” he added

Prof. Sanda advised fiscal authorities to undertake policies that assist the monetary authorities in maintaining stability in the foreign exchange market, noting that growth in money supply should be accompanied by economic growth. He cautioned that where the former grows faster than the latter, inflation (and foreign exchange volatility) will be the inevitable consequence, and there is a need to adopt the proposed methodology for the measurement of the exchange rate of the naira.

In his remarks, Vice Chancellor of FUBK, Prof. MZ Umar, noted that the recurring exchange rate volatility in Nigeria is also associated with reckless hoarding and exchange of goods and services with foreign currencies. He called on government and other regulatory agencies to intensify efforts towards promoting economic growth and development in the country.

“The efforts of the CBN to calm nerves and reduce naira volatility in Nigeria is commendable, although more need to be done by the appex bank and other regulatory agencies in this is regard,” said the VC.

He thanked the presenter and participants, while pleading for sustained frequency of the seminar series in the institution.

By Zayyad I. Muhammad 

Hajj management in Nigeria is facing two main problems. Firstly, funding is tied to the dollar; once the dollar’s value fluctuates against the naira, the hajj fare becomes uncertain. This is currently happening. The second problem relates to flight schedules to and from Saudi Arabia, etc. These problems are twofold, so to speak, and should be collectively tackled by both the National Hajj Commission of Nigeria (NAHCON) and state Hajj commissions.

The solution to these problems could be as follows:

Firstly, the Nigerian hajj fare should be tied to or pegged to the Saudi Riyal. The Riyal is stable due to the country’s strong economic fundamentals and prudent financial management. Additionally, apart from pegging the Nigerian hajj fare to the Saudi Riyal, the National Hajj Commission of Nigeria should study the Malaysian hajj management model.

In Malaysia, the Hajj has a funding management system called the Tabung Haji. Research on the Malaysian system of hajj management indicates that it involves several components. The Tabung Haji (Pilgrims’ Fund Board) plays a crucial role in managing the financial aspects of Hajj for Malaysian pilgrims.

Malaysian Muslims intending to perform Hajj must make regular contributions to Tabung Haji. These contributions accumulate over time and cover expenses such as transportation, accommodation, and other logistical needs associated with Hajj. NAHCON also implements a similar savings scheme, albeit with limited success. It’s time for NAHCON to redesign the Hajj Savings Scheme in collaboration with banks and other financial institutions, particularly those offering Islamic banking services.

The new scheme should allow intending pilgrims to enter into an investment plan for more than one year. As pilgrims deposit funds into their accounts, the bank or financial institution would invest the money for a period ranging from 2 to several years. By the end of this period, pilgrims would have accrued enough funds for the Hajj fare, along with additional profits. This approach would streamline the process for both pilgrims and commissions, providing ample time for planning.

Taking a clue from the Malaysian Tabung Haji, it manages its funds through various Shariah-compliant investment instruments, such as equities, real estate, and sukuk (Islamic bonds). The returns from these investments sustain Tabung Haji’s operations and cover the costs of Hajj for Malaysian pilgrims.

In addition, the Malaysian Tabung Haji has achieved remarkable success by offering diverse Hajj packages customised to meet the needs and preferences of Malaysian pilgrims. These packages encompass a range of services, including luxury accommodation in Makkah and Madinah, transportation, meals, and guidance.

Moreover, Tabung Haji extends financial assistance to eligible Malaysian pilgrims who may require support to undertake the Hajj journey. This assistance may comprise subsidies for Hajj expenses or loans to cover pilgrimage costs, which can be repaid in instalments.

The National Hajj Commission has demonstrated commendable efforts over its three decades of existence. However, the current instability in the exchange rate between the dollar and the naira underscores the need for the commission to consider pegging the hajj fare to the stable Saudi Riyal. Additionally, NAHCON should revamp the Hajj Savings Scheme to offer long-term, Halal investment options for intending pilgrims. This approach would contribute to a more organised and financially sustainable hajj management system.

To achieve these goals, NAHCON should establish a diverse team comprising individuals from various sectors to assist in redesigning the Hajj Management System, particularly the pilgrim savings scheme.

Zayyad I. Muhammad writes from Abuja via zaymohd@yahoo.com.

By Sani Bello Hamza

Mr. President, before I delve into my concerns, it is indeed important to lay a proper foundation. As an aspiring lawyer and an opinion leader in my own capacity, I am not unaware of the challenges and intricacies of leadership. The stress, strain, and challenges are sometimes daunting and discouraging.

However, Mr. President, even your enemies and those from the opposition party can not doubt your capacity to lead and your unique style of leadership. Your ability to lead and manage successful politicians, industry men and academics leaves us in awe and surprise.

Your ability to understand and provide lasting solutions to national issues ought to be given careful consideration and serve as an exercise for students at various levels. Your unique style of leadership is indeed worthy of emulation and study. The Asiwaju school of thought!

Dear President Bola Ahmed Tinubu, It has been a year since Nigerians qued in mass to support you and the renewed hope agenda. They voted for you and supported your candidacy. Nigerians, from every nook and cranny of the country, shun the nay-sayers and triumph to support you and the APC to make sure you make it to the Villa. It has now become history and forms a special part of the Asiwaju school of thought! 

Mr. President, sir, Before you declared your intention to run for president in early 2022, Nigerians were lost in search of a trusted and reliable leader, a qualified politician capable of steering them to the promised land. The APC seems to be falling after eight years of sheer disappointing tenure, and the PDP was not an option to be considered, given its 16-year tenure.

The resurgence and emergence of the renewed hope agenda and the “emilokan” slogan gave Nigerians a sigh of relief and hope that the table would turn around. That is, it’s time to reap what they sow and enjoy the fruit of their labour and hard work. 

Mr. President, I wish I could write this letter and deliver it directly to your mail or doorstep. Sadly, it’s not possible. I still wish I could be featured on national television to address you and beg you for one thing, yes, just one thing, Mr. President. 

If I were given the opportunity to meet you, the president, in a one-on-one conversation, I wouldn’t talk much. I promise to make the conversation short, brief, and succinct. Who will give me this golden opportunity? 

Anyway, the popular Hausa adage; “guntun gatarin ka ya fi sari ka bani” meaning your short axe is better than cut and give me” is what kept resounding in my skull. I will use the little I have to achieve what I don’t have. I will send this letter out, hoping that one day it’ll reach you, Mr. President. In a one-on-one meeting with the president, I will tell him to put aside anything that has to do with salary increases for the working class and concentrate on bringing back to life the already dead Naira. A stronger Naira is the only option.

Okay, back to the subject matter: Nigeria is indeed a blessed country with abundant natural resources (Minerals and Humans). Yet, our economy keeps dilapidating day in and day out. It always seems that yesterday was better than today, last month was better than the current month, and we wish to be taken back to the previous administrations. 

Why is this happening? What is the problem with Nigeria?

I was tempted to share a post on my Facebook timeline from March 2015 (nine years ago) in which the writer lamented how the prices of commodities skyrocketed during the fasting period. The only price that caught my attention was the price of spaghetti, which rose from 60 – 70 naira. Man! How much are you buying spaghetti now? They’ll say the dollar has risen.

Mr. President, back then, in 2014, the exchange rate of dollar to naira was 60-70 per dollar. The minimum wage then was 18,000 naira, which is enough for an average Nigerian to buy a bag of rice and other commodities to sustain himself throughout the month.

Fast forward to 2024, 10 years later, the Naira hit an all-time record of 1900 to a dollar, and the minimum wage has graciously increased from 18,000 to 30,000. The 30k will not be enough for the average Nigerian to buy half a bag of rice, not to talk of other daily life struggles.

Mr. President, I strongly believe a salary increase will only increase the amount of money in circulation, thereby making inflation the front seat of our economic discourse. They say more money, more problems. 

Mr President, sir, a good road network connecting rural to urban areas spiced up with increased exports will benefit the country more than an increased salary for less than five per cent of the country’s population. 

Dear President Bola Ahmed Tinubu, I equally believe the renowned economists in your midst understand the intricacies of our economy and where it’s heading to. With your continuous support, dedication and unwavering commitment to the progress of our nation, Nigerians will one day smile and say Alhamdulillah!

Sani Bello Hamza is a Law Student at Ahmadu Bello University Zaria. He writes from Zaria and can be reached via sanibellohamza@gmail.com.

By Prof. Abdelghaffar Amoka

In 2011, the exchange rate was 1 USD to 155 naira, and in 2024, it is about 1 USD to 1,550 naira. That is a ratio of 1: 10 for 2011 and 2024.

In 2011, a loaf of bread cost 150 naira, and in 2024, it is about 1,500 naira. That is a ratio of 1: 10 for 2011 and 2024.

In 2011, a bag of maize cost about 5,000 naira. In 2024, it is about 55,000 naira. That is a ratio of 1: 10 for 2011 and 2024.

The price of most basic needs has increased ten times between 2011 and now. That is still a ratio of about 1: 10 for 2011 and 2024.

Then, the price of fuel in 2011 was 65 naira per litre, and the current price in 2024 is about 690 naira. That is still a ratio of about 1: 10 for 2011 and 2024.

If the exchange rate and fuel price remain the same, if the minimum wage was 18,000 naira in 2011, it should be 180,000 naira in 2024.

Abdelghaffar Amoka Abdelmalik, PhD, wrote from Ahmadu Bello University, Zaria. He can be reached via aaabdelmalik@gmail.com.