It seems PZ Cussons has recorded a net asset position for the first time in 125 years. The company went from a half-year N7.6 billion profit to N74 billion loss (read the letter here). If Nigeria does not stop this trajectory, our economy could collapse by Q2 2025. Note that by the end of this quarter, some manufacturers could experience more than 2X in losses with a Q3 2023 starting benchmark, and if that continues, many companies will close shops.
Already, Nigerian Breweries has recorded its worst loss since 1946: “Nigeria’s largest beer maker Nigerian Breweries posted N145.3 billion in pre-tax loss for last year, its biggest since opening shop in the country in 1946.”
I repeat my position which I posited in June 2023 that Nigeria cannot afford to float its currenncy: “Nigeria’s floating of its currency, while progressive, will cause severe perturbations in the economy – and a stable state may not come as most experts have predicted: “
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My thesis was not complicated, and it was what I learnt in secondary school Economics. “In his O’ Level textbook on economics, AO Lawal explained demand and supply and the movement of price on the demand-supply curve. If I apply what he explained in that book, floating naira with no capacity to earn USD dollars will kill Naira, because there is an asymmetric imbalance on demand and supply of USD in the Willing Buyer, Willing Seller nexus. In other words, two people may each have $100 to sell while twenty people want to buy each $100. If you do not close that number to near parity, the equilibrium point will keep shifting and I do not see how Naira will stabilize because demand outweighs supply here.”
As a non-economist but as a kid who read Economics textbooks while in secondary school and wrote external WAEC (GCE), I am waiting for someone to explain how my position is wrong. Nigeria is destroying the economy since without improving the SUPPLY of USD, Naira will not attain a positive equilibrium point.
Indeed, hope is not a strategy. How is the float going to work on the demand-supply curve? My model is that it will “cause severe perturbations in the economy” because with limited USD Supply, Naira will shift poorly as USD Demand rises.
Can we move from a full-float to a partial-float with the partial one covering manufacturers?
It seems PZ Cussons has recorded a net asset position for the first time in 125 years. The company went from a half-year N7.6 billion profit to N74 billion loss (read the letter on click). If Nigeria does not stop this trajectory, our economy could collapse by Q2 2025. Note that… pic.twitter.com/vw2a5LMQAD
— Ndubuisi Ekekwe (@ndekekwe) February 21, 2024
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Round-tripping and our inability or unwillingness to bring perpetrators to book is the only reason why that decision to float the naira was made. To worsen matters, we refuse to export to take advantage of the FX imbalance.