The naira is known to have dropped against major currencies in recent times. Perhaps, this was why, during the 2015 Nigerian presidential election, President Muhammadu Buhari made the point of “making the naira equal to the dollar.” He was speaking against the backdrop of the depreciation of the value of the naira during the elections. It is just by mere announcements or campaign rhetoric that the naira will be made equal to the dollar?
Let us concede that the fall in the naira value during the elections can be due to the scramble for the dollar by politicians for the elections on the one hand; and the panic buying of travellers traveling out of the country for fear of violent reactions that might characterize the announcement of the result, we cannot wave off Buhari’s statement as a cheap attempt to score political point.
As Nigerian Head of State (1983-1985), Buhari was known to have run his regime based on strong fiscal prudence and rigorous financial discipline, which at that period the naira was said to be stronger than the US dollar. But is this just as simple as making the naira equal to the US dollar?
Since 1999, inflation rate in the country has been on the high. The near-total dependence on oil (which is usually dictated by the international market) hasn’t helped matters. The increase in domestic price of oil has also taken its toll on the on the national price level. All these put the naira in a weaker position against major foreign currencies.
Presently, Nigeria lacks the capacity to refine its own crude oil which makes her depend totally on importation. There is an argument that the presently devalued naira will only encourage exportation (of crude oil). In fact, this was exactly the same Bretton Woods institutions’ arguments, and their Nigerian supporters, in defence of the Structural Adjustment Programme (SAP) in the 1980s. Lending credence to this argument was the International Monetary Fund (IMF) Czar, Christiane Largarde, who in early 2012 justified her position on devaluation of the naira with this argument. We were spoon-fed with this argument in elementary and intermediate Economics classes, yet it still appears to make a lot of sense. When will this child grow up?
If President Buhari is serious about strengthening the position of the naira against, say the dollar, his government must make deliberate policies to diversify the economy from oil dependence; increase its productive base through youth enterpreneurships, innovation; and stimulate demand for domestically-made goods.