The Central Bank of Nigeria (CBN) on Friday dropped a bombshell that has once again ignited discussion on Nigeria’s falling currency, the naira.
At the 57th Chartered institute of Bankers Nigeria (CIBN) annual lecture entitled: “Radical Responses to Abnormal Episodes: Time for Innovative Decision-making”, the CBN Governor, Godwin Emefiele, while outlining policy thrust for 2023, expressed optimism that the short-term outlook of the Nigerian economy remains good.
While he projected that the rate of inflation will remain elevated and above the 12.5% growth-aiding threshold, Emefiele said that the CBN will maintain the current tight Monetary Policy stance in the near-term, “especially in view of rising inflation expectations and exchange market pressures.”
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The CBN governor, while assuring Nigerians that the central bank will continue to act in the best interest of the economy, revealed that remittance to Nigeria’s foreign reserve has dried up.
“The official foreign exchange receipt from crude oil sales into our official reserves has dried up steadily from above US$3.0 billion monthly in 2014 to an absolute zero dollars today,” he said.
As Emefiele reiterates the need to boost Nigeria’s foreign exchange inflows through non-oil proceeds, it dawned on Nigerians that he had just revealed that the country’s foreign resee went from receiving $36 billion annually in 2014 to nothing in 2022 under his watch.
This underpins economic experts’ take on the naira’s free fall and Nigeria’s inflation. Experts have for long pointed at insufficient liquidity as the reason for the naira’s growing decline in the foreign exchange market, while Emefiele keeps pointing fingers at many things.
At the CIBN Annual Bankers Dinner, Emefiele blamed the current state of the naira on Nigerian students seeking education abroad. He said that Nigeria recorded a tremendous increase in visa issuances by the United Kingdom in 2022 alone.
According to him, the number of student visas given to Nigerians by the United Kingdom spiked from a yearly average of about 8,000 visas in 2020 to almost 66,000 in 2022, implying an eight-fold increase amounting to $2.5 billion yearly in study-related forex outflow to the UK alone.
He stated that the move had immensely put pressure on Nigeria’s foreign reserves and the Naira.
In September 2021, the central bank governor notoriously accused AbokiFX, an online FX aggregator, of economic sabotage. He said the forex rates publisher is responsible for the naira’s dwindling performance against the dollar, forcing it to shut down operations. The naira was at N570/$1 then.
Several months after AbokiFX suspended operation, the naira’s depreciation spiraled further downward. Emefiele said then that it was due to non-working refineries in the country, which forces the Nigerian National Petroleum Corporation Limited (NNPCL) to spend as much as 40% of the proceeds from crude oil exports on importation of petroleum products – gulping the foreign exchange that should have built up the foreign reserve.
As 2022 winds down, the naira has been dangling below and above N800/$1 irrespective of Emefiele’s blames and monetary policies. The crisis has been duly traced to Nigeria’s low oil output mainly orchestrated by oil theft.
Nigeria is the only oil producing country that did not benefit from the oil windfall induced by the Russia-Ukraine war. This is because more than half of the oil produced in the West African country has been stolen, leaving the government with meager oil export that is significantly insufficient for the amount of forex liquidity required to boost the naira.
Against the backdrop of oil theft, Emefiele’s open admission that the foreign reserve is not receiving any remittance from the NNPCL, underscores the belief that his blame antics emanates from cluelessness – his inability to proffer a solution to Nigeria’s raging forex crisis. It also paints a gloom future for Nigeria as an oil-based economy. The country has taken to borrowing as the revenue shortfalls bite harder, shooting its public debt profile high.
With non-oil exports yielding insignificant forex proceeds, the oil theft-inspired revenue shortfalls mean that the naira’s recovery is still farfetched.