Nigeria’s Naira is facing significant challenges due to a lack of policy clarity, deindustrialization, and the impact of the border closure. The current exchange rate of Naira to the US dollar has exceeded N1000 in the black market, reflecting the currency’s struggle. The lack of clear policies has contributed to this issue.
The poorly implemented border closure has resulted in massive deindustrialization in Nigeria. This policy has had a devastating impact on industrial output, causing a decline of over 10%. Many small producers in Lagos and Aba relied on exporting their goods to neighboring countries like Benin Republic and Cameroon. However, with the border closure, these producers were forced to shut down their shops. This has been a significant setback for Nigeria’s industrial sector.
Former Minister of Finance and Trade, Industry and Investment, Mr. Olusegun Aganga, has highlighted the deindustrialization trend in Nigeria over the past eight years since 2015. He emphasized that the manufacturing sector experienced its best years between 2011 and 2014, with double-digit growth achieved through collaboration between the government and the Manufacturers Association of Nigeria (MAN). However, since 2015, Nigeria’s industrial sector has been declining, with limited government-private sector interaction and a lack of continuity in industrial planning.
One of the critical factors affecting the strength of the Naira is Nigeria’s need to re-industrialize. It is essential to focus on revitalizing the manufacturing sector, including light manufacturing and modern industries such as startups and digital firms. The absence of industrial growth and the lack of electricity infrastructure have significantly impacted production costs. Increased fuel subsidies have also added to the cost burden. To address this issue, the government must implement effective infrastructure development plans.
Mr. Aganga also highlighted the issue of standards in Nigeria’s exports of non-oil commodities. Poor compliance with sanitary conditions has resulted in a high rejection rate of agricultural produce in Europe and the United States. This issue needs to be addressed to improve Nigeria’s export performance.
Despite the current challenges facing the Naira, there is hope for its appreciation in the coming weeks and months. If oil prices rise further and production output increases, Nigeria’s external reserves are likely to improve. Typically, when this occurs, the Naira strengthens. However, it is crucial to achieve sustained strength in the Naira, which requires re-industrialization and the promotion of a strong manufacturing base.
The current geopolitical situation is a factor that could potentially impact the oil market and benefit Nigeria. If there is a ground invasion in Gaza by Israel and other players join the conflict, it could lead to disturbances in the oil market. Nigeria, being an oil-producing nation, would be affected by any disruption in the Strait of Hormuz, resulting in oil crises. This presents an opportunity for Nigeria to improve its economic prospects.
In conclusion, Nigeria’s Naira is currently facing difficulties due to a lack of policy clarity, deindustrialization, and the impact of the border closure. The currency’s struggle can be attributed to these factors. However, there is potential for improvement if Nigeria focuses on re-industrialization, addresses infrastructure challenges, and improves compliance with international standards for exports. Additionally, external factors like geopolitical events can impact the oil market and provide an opportunity for Nigeria to strengthen its economy.
