As the dust settles after the Niger Republic coup, Nigeria faces another challenge: the naira’s steep decline. Last week, the naira reached a worrisome N955 to US$1, stirring panic among businesses and citizens. President Bola Tinubu and the Central Bank of Nigeria (CBN) must act swiftly and creatively to prevent losing control over the currency and the economy.
The situation is grim. Following Tinubu’s push for CBN to merge exchange rates two months ago, the naira’s downward trajectory has gained momentum. The goal of achieving a “realistic” rate and bridging the gap between official and informal market rates remains elusive. With an official rate of N767.76/$, the gap for illegal arbitrage has widened from N100/$ to nearly N200/$.
The absence of a coherent economic strategy, coupled with regulatory agency reforms, inflation, and business setbacks, raises the specter of the naira crossing N1,000/$, possibly spiraling out of control. The IMF’s recent statement on “loose fiscal and monetary policies” has fueled concerns about naira stabilization.
Wale Edun, Tinubu’s trusted economic adviser, advocates a realistic rate of N700/$, underscoring that higher rates lack economic fundamentals. The Economist Intelligence Unit’s prediction of N1,000/$ until 2027 now seems overly optimistic.
This isn’t surprising. Supply is hampered by weak non-oil exports, while demand is inflated by speculators, hoarders, and unchecked money laundering by various actors. The market is manipulated by politicians, officials, criminals, and contractors, with ill-gotten naira driving transactions.
Tinubu must transition from impulsive decisions to comprehensive economic strategies. A well-rounded Economic Management Team (EMT) with economists and technocrats is imperative.
To prevent currency loss and hyperinflation, the CBN should temporarily support the forex market. Additionally, curbing Bureau de Change activities and unscrupulous banks, alongside collaboration with regulatory, anti-corruption, and law enforcement agencies, is essential.
Given high unemployment, inflation, and production contraction, robust stimulus measures are essential. Targeting strategic sectors such as agriculture, pharmaceuticals, transportation, and small businesses can boost recovery. SMEs deserve particular attention, including power subsidies, low-interest credit access, and reduced taxes.
Tough decisions must be grounded in thorough analyses. Addressing the dollar shortage requires bolstering the market temporarily to protect the naira. Vigilant planning is needed to avert economic collapse. Tinubu must adopt a measured approach and prioritize well-planned actions for Nigeria’s economic challenges.