In the last 8 months, the value of the naira against the dollar, has dropped by almost 90%! The rate at which our naira is losing value is staggering. People are wondering: Why is the naira is crashing? And why now? Is there is any hope at saving the naira? Well I am no expert, but I have 3 suggestions on how we can save the naira.
Until 8 months ago, I had spent the better part of the last 9 years, in the Turkish Republic of Northern Cyprus. The beauty about Northern Cyprus is that you can spend the 3 major currencies, in just about any place. Whether you’re at a barber shop, fruits market, supermarket or in a taxi, it doesn’t matter. You can whip out a dollar, euro or pound note, to make just about any payment. But you would get your change back in Turkish lira though.
Funny enough, the Northern Cyprus still consider themselves as third world. And do you know something else? There is no such thing as black market, when it comes to currency exchange!
Say what? Well yes, and I don’t know how they do it! That means everyone uses the same rates general exchange rate. Of course the rate could change from one person or business to the other, but the difference is usually not much.
So there is no black market for currency exchange, in Northern Cyprus, and I have no idea how they do it.
I remember more than a decade ago, black market was “illegal”. In fact, by definition, black markets are illegal (please confirm in your dictionary). Years ago, buying from back market was not something you want to get caught doing. It did not matter whether it was petrol or American dollars you were buying, black market was illegal!
Yet in the last 10 years, we have gone from black markets being illegal, to black markets being the only way.
I think this is CBN’s fault! Apparently in the battle against money laundering, CBN stopped banks from selling foreign currencies. And how much has that helped in stopping money laundering? Go back in history and see how much impact that has made on the naira.
But what has happened instead? It became more difficult for people to legitimately transfer money abroad! This now forces everyone else to buy from the black market. Corruption is now so deep that now the black market is no longer for money laundering, but for everyone.
We hear of “official” forex rates, rates that nobody uses? Why are they official if we cannot buy currencies at such rates? If you go online or wish to change dollars into naira outside this country, we use the “official” rates. But when it comes to doing the same thing inside the country, even the banks use illegal (yes, it is illegal) rates.
I run a Study Abroad Agency and I have to deal with students who have to pay their tuition fees abroad from time to time. I recently paid an application of $150 for a student using my bank’s card online. Can you guess what rate the bank (whose name I will not mention) used, in changing from Naira to Dollar?? N285 naira per dollar!
Please tell me… who, in Nigeria, uses these advertised “official rates”??? Now get this… I had some dollars left in my dollar account which was too small to cash out because the bank only had big bills. As a result, I had to change the dollars into naira… using this same bank.
Can you guess what rate they used, in changing from Dollar to Naira? N199 naira per dollar! Are you kidding me? A spread of N86 naira per dollar? So are we being deceived, or are we letter ourselves be deceived? Am I the only one seeing a conspiracy here? Or am I just ignorant?
So… how can we save the naira this year?
1. Give Banks Forex Licence
A necessary change in saving the naira, is for CBN to give banks licence to sell foreign currency at near official rates. This is my opinion.
BDCs should not be the only ones with license to sell foreign currency in Nigeria. If I know that I can get dollars at N200 naira from the bank, why the hell will I go to the black market? Am I the only one who thinks the black market will eventually return to money launders, if banks sold foreign currencies? Couldn’t we save the naira this way?
But what about money laundering? I asked once, and the feedback I got was that having banks not do forex means limiting money laundering. Okay fine, it limits money laundering within Nigeria or outside Nigeria? “Outside” said my friend. How do you control that? And that leads to the second change that’s necessary to save the naira.
2. All International Transfers Must Go Through CBN
The CBN is already doing this, for payment of school fees and medical bills, and stuffs like that. Why then can the CBN not have all transactions monitored?
Through which banks do all these loots pass? And CBN is not aware? Or they just choose to turn their backs? Am I the only one who smells a conspiracy here? Why do I feel that if the CBN did their jobs well, we would have less problems with the naira, in general?
I’m not an expert, and I do not know how workable this is, but it has to be possible. If the CBN is serious about stopping or reduce money laundering from Nigeria outward, I have a suggestion. They should watch all international transactions, rather than tuning their back on them.
3. Buy Local Goods
This one is obvious, and this has a lot to do with our mentality towards Nigerian products. Fine, there are some inglorious business people who generally lack business ethics… agreed. But if you go to the market to buy rice, and you see rice from the North, next to imported rice… which will you go for?
More Nigerians would not buy the Nigerian rice! Most of us will go for the imported rice, and why is that? The same applies to cars, cell phones, laptops and other products. I’m talking about Innoson Vehicles, Imose cell phones, Wikeplus Power Banks and Zynox Computers.
A friend told me that the Chinese, whenever abroad, would prefer to use Chinese products. When will Nigerians become patriotic about Nigerian made goods? The love for Nigerian (products), is the growth of our Naira.
I believe if the CBN gave banks forex licence at near official rates, black markets can return back to being illegal, and for money launderers. I heard that the late Sani Abacha tried to wipe out black markets in his time.
Once banks start offering forex to the people at official rates, then CBN can check international transfers for money laundering. With all these limitations on the real Nigerians, people are still able to loot millions and billions of dollars from this country. So can we stop implementing a strategy that clearly doesn’t work?
Finally, if we patronized our locally made and grown goods, we can increase our local GDP. I don’t know how that works, but it will surely improved the value of the naira. So let “made in Nigeria”, which is for Nigerians, be used by Nigerians.
I’m no expert, but just an ignorant man who is trying to make sense of all this. So please share your opinions and comments in the comments section below. Let us know how you think we can save the naira, and how wrong I may be, on these issues.