Till date, since the announcement, launch and the circulation of the new naira notes, most Nigerians have not seen the new notes and the reason(s) behind it, with some asking how this affects consumers’ purchasing power.
Daily, the Nigerian consumers face multiple challenges – from inflation to naira depreciation. The combination of both factors has impaired the purchasing power of the Nigerian consumers. The naira has depreciated in the last decade against other major international currencies such as the US dollar, British pound sterling, euro, yuan, even including the South African rand.
According to data on exchange rates from the Central Bank of Nigeria (CBN), the naira depreciated against all the international currencies between October 2015 and October 2022. The naira, which traded on the average at N196.5 to one US dollar in October 2015, depreciated by 122 percent to N436.78 to one US dollar by October 2022.
A pound sterling that was exchanged to the naira at N301.73 in October 2015 traded to the naira at N491.68 in October 2022 (both at official rate), indicating that the naira depreciated by 63 percent. The naira also depreciated by 98 percent to the euro as against the N216.6 it was exchanged to the euro in 2015, it traded at N428.66 to the euro in October 2022.
The naira depreciated by 119 percent to the Swiss franc within the reference period from N198.69 to the Swiss franc in October 2015 to N435.65 in October 2022. The depreciation against the Japanese yen was 79 percent from N1.63 in October 2015 to N2.92 in October 2022.
The Nigerian currency also depreciated against CFA by 102 percent from N0.32 in October 2015 to N0.64 in October 2022. With another depreciation of 104 percent against WAUA, the value of the naira against this currency dropped from N273.06 in October 2015 to N556.39 in October 2022.
One of Nigeria’s largest trading partners, China, has its currency appreciated against the naira during the reference period. The yuan/renminbi appreciated against the naira from N31.10 in October 2015 to N60.44 in October 2022. In addition to being Nigeria’s trading partner, China is also among Nigeria’s largest creditors.
Saudi Arabia’s riyal gained against the naira by as much as 122 percent from N52.37 in October 2015 to N116.19 in October 2022. In addition to being a power broker within the Organisation of Petroleum Exporting Countries (OPEC), Nigerians troop to the country on religious ground through the periodic Umrah (lesser hajj) and the annual hajj pilgrimage.
Danish krone gained against the naira by 98 percent as the naira depreciated from N29.04 in October 2015 to N57.61 in October 2022. In the light of the foregoing, the naira depreciated across board from the perspective of any currencies it is compared with.
As the depreciation intensified, inflation has become intense in the country. As of September 2022, Nigeria’s headline inflation hit 20.77 percent, the highest in a decade. Food inflation was even higher at 23.34 percent. That food inflation is on the rise displays the enormous amount of the problems Nigeria, an agricultural economy, faces.
The combination of the depreciating naira against international currencies in some way contributed to the rising inflation. Since the start of the Russian-Ukrainian war, the prices of staple foods such as bread, pasta and cereals, have generally skyrocketed in the country.
The consumer goods firms bear the brunt of the surge in the prices of raw materials, especially wheat, which is imported from either Russia or Ukraine. For instance, the price of sliced 500g bread rose by 33.12 percent year-on-year as of August 2022, based on NBS data. The unsliced bread of the same quantity rose by 32.5 percent year-on-year during the same period.
Evaporated tinned milk Carnation 170g rose by 28 percent year-on-year as of August. Also, evaporated tinned milk (Peak) 170g was higher on a year-on-year basis by 33 percent as of August 2022. The impact of the Ukrainian crisis could be seen on the energy sector. The price of Bonny Light, Nigeria’s crude, hovers around $90 a barrel. With all Nigeria’s refineries not yet working, the impact of the depreciating value of the naira is felt on the landing prices of petrol, kerosene, diesel, among others.
Amid this, CBN raised the benchmark interest rate, the Monetary Policy Rate, from 13.5 percent to 15.5 percent, to rein in inflation. In all of these, the Nigerian consumers are at the receiving end.
Average national salary has not increased in the last five years. This is as the costs of feeding, housing, and school fees have increased steadily. With unemployment as high as 33.3 percent in the country, it means an average Nigerian worker has enough dependents to take care off among siblings and parents.
It is time for the Nigerian government to address the multifaceted problems facing the Nigerian workers. They deserve to live a life that is worthwhile from childhood to adulthood. Nigerian workers deserve a housing unit that dignifies them. They should be made the centre of Nigeria’s economic development as it is only when they are well taken care of that the nation’s economic potential can be unleashed.