The Nigerian naira’s persistent decline against the US dollar has reached a new low, with exchange rates in the parallel market fluctuating between 1,005 naira and 1,025 naira for one US dollar. This depreciation has raised serious concerns among small-scale enterprises, manufacturers, and industry associations.
The ongoing depreciation of the naira has been a pressing issue since the Central Bank of Nigeria adopted a floating exchange rate system against the US dollar and other foreign currencies in June. The diminishing value of the naira is causing significant challenges for manufacturers, who are struggling to procure raw materials, potentially leading to layoffs and factory closures.
Bureau de Change operators have reported these exchange rates in the parallel market, which have experienced fluctuations from 980 naira to the dollar just two weeks ago. These currency fluctuations are causing uncertainty and hardships for businesses.
The ongoing forex crisis and the devalued naira are expected to result in rising inflation as the cost of imported goods increases, affecting businesses and consumers alike. Small and medium-sized enterprises (SMEs) are feeling the pressure of higher production costs and reduced consumer purchasing power, leading to difficulties in selling their products and servicing their loans.
These challenges are further compounded by other factors, including elevated fuel costs and competition from lower-priced foreign products. The high exchange rate may also lead to increased prices for petroleum and other commodities, impacting inflation rates and wage negotiations.
In response to this situation, the House of Representatives has directed the Committee on Banking Regulation to investigate the use of the US dollar and other foreign currencies for domestic transactions in Nigeria. The committee will also explore measures to stabilize the currency, combat speculative forex activities, and reduce the pressure on foreign currencies. Additionally, the government is urged to implement policies and structural reforms that reduce corruption and promote economic diversification within the country.
The ongoing depreciation of the naira and the associated economic challenges are of great concern for Nigeria, impacting businesses, consumers, and the overall economic outlook. It remains to be seen how the government and central bank will address these issues to stabilize the currency and support the economy.