The Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) has decried the rate of depreciation of the Nigerian currency, the naira, saying that this development poses great risk to manufacturers and importers in the country.

The body added that the rapid rate of naira depreciation will make Nigerian goods uncompetitive even as it could further worsen inflation in the country.

NACCIMA National President Dele Kelvin Oye Esq., made the remark yesterday and expressed concerns as the naira plunged against the US dollar in the last few days to about N1500/$.

“The significant depreciation of the Naira, now at 1500 to the dollar, poses multiple challenges for Nigeria. The weakening currency increases import costs, affecting prices of everything from food to electronics, thereby fueling inflation and reducing the purchasing power of Nigerians, especially those on fixed incomes. Higher import costs also escalate production expenses in sectors reliant on foreign materials, impacting overall business operations,” Oye said.

Nigeria’s headline inflation rose for the fifteenth consecutive month in March 2024 to 33.20 percent, further eroding the purchasing power of hapless Nigerians. Food inflation on the other hand hit 40.01 percent, a development that worsens malnutrition and poverty in Africa’s most populous nation.

Concerning the impact of the fast-depreciating naira on government activities, Oye said the foreign debt servicing costs of governments and businesses will rise as more naira will be needed per dollar, straining financial resources and potentially reducing public service funding. While a weaker naira might attract foreign investment by making assets cheaper, it could also deter investors seeking stability.

According to the data on international debt servicing provided by the Central Bank of Nigeria (CBN), Nigeria coughed out $1.11 billion in the first quarter of 2024 for debt servicing. This compares to $801.36 million paid for debt servicing in the corresponding quarter in 2023.

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“On a positive note, a devalued naira enhances the competitiveness of non-oil exports like agriculture and manufacturing on the global market. However, this benefit is contingent on the country’s ability to efficiently increase production,” Oye added.

It should be noted that the recent bank recapitalisation mandate handed over to deposit money banks, merchant banks, non-interest banks as well as primary mortgage banks has forced Nigerian banks in search of additional capital from both local and foreign investors.

Leading tier-one banks such as Access, GTB, First Bank among others have indicated they will raise funds overseas. Access Bank is to raise $1.8 billion through various financial instruments including Eurobonds. GTB is to raise $750 million also partly through Eurobonds. Other banks are also set to follow the same path.

This is in addition to the already pool of Eurobond debts in the country, thus increasing the strain on the economy to service these debts.

“Domestically, the economic uncertainty discourages consumer spending and confidence. For households receiving foreign remittances, the value of received funds increases, offering some relief. Conversely, expenses for foreign travel and education escalate, impacting affordability.

“Given these complexities, it is crucial for the government to stabilize the Naira by potentially pegging and defending it, rather than leaving it to market forces, a strategy even economically stronger nations like Qatar and Saudi Arabia employ,” Oye said.