What CBN’s devaluation of the Naira means for average Nigerians
There has been growing anxiety in Nigeria after speculations on the devaluation of the Naira by the Central Bank of Nigeria, CBN created fears of impending inflation. With the COVID-19 outbreak creating economic hardship in the country as businesses and activities are shut down, the prices of items in the market are expected to skyrocket if the lockdown continues. This makes the CBN’s announcement on March 22 that it will be pegging the naira at ₦380 to a dollar, up from ₦360, a worrisome development to many Nigerians.
The naira has been in perpetual decline in recent times and the last devaluation in 2016 saw the currency plummet to over ₦500 to a dollar amid a devastating recession. Although the exchange rate eventually stabilized at ₦360 after the country came out of the financial crisis the following year (2017), many Nigerians were made poorer in-between.
With the uncertainty facing the country and the world at the moment, it’s almost impractical to see the people cushion the effect of any devaluation. But the CBN said that the decision to peg the Naira at N380 to the dollar was not devaluation but a currency adjustment.
“CBN has a responsibility to see to the adjustment in the national currency. What you have seen is an adjustment in the country’s currency (and not devaluation),” the CBN Governor, Godwin Emefiele said.
“The current economic circumstances and macroeconomic fundamentals do not support Naira devaluation at this time.”
The crux of the matter remains that the presumed currency adjustment still gives room for the rise in the cost of goods in the market since traders will factor in the rate at which they got forex for importation. What this means is that Nigerians will be paying more for commodities as the market adjusts to the new exchange rate.
The government has been struggling to keep up with funding the 2020 national budget after it suspended borrowing the controversial $22.7 billion from external lenders. The situation was worsened as the price of crude oil fell below $30 per barrel at the international market following the impact of the coronavirus pandemic on the global economy.
But as the COVID-19 shutdown begins to affect many Nigerians, the CBN has released N1.1 trillion for the critical sectors including N100 billion for the health sector, while providing an additional N50 billion naira care package for those who are most affected by the situation.
