The naira, Nigeria’s currency, has bitten the dust. Once the dominant currency on the African continent, stronger in global purchasing than the US dollar and pars the British pound, the currency is no longer safe as its value is being attacked and disempowered on two fronts to a level not seen in more than half a century.
Abroad, exchange rate depreciation is quickly diminishing its worth and at home, inflation is sweepingly destroying its power to buy goods and services. The combined impact of these discrete changes has significantly ravaged the welfare of millions of Nigerians, drifting the economy, yet again, to the brink of another recession – a period of intense economic hardship and a fertile terrain for breeding violence and crime in the land.
Tracing the roots of these economic problems and how the naira can be liberated to restore faith in currency is what this article is about.
There is no question that Nigeria’s most alarming and biting twin economic indicators are the soaring inflation rate and the free fall of the international value of the naira (exchange rate), both contributing to the cost-of-living crisis. Inflation has escalated to roughly 34 percent as of May 2024 and the dollar to an all-time high: about N1,500 as of mid-June 2024; there’s rapid decline of the naira in the immediate aftermath of two major policy errors.
First, the liberalisation of the naira-dollar market in June 2016 and in June 2023. Second, the removal of the petrol subsidy in May 2023 given that the price of petrol affects the price of other commodities that depend on it, e.g., transportation and production.
According to ILO estimates, approximately 60 per cent of businesses in the country self-generate 59 per cent of their total energy need, which is three times more expensive than from the public grid. Moreover, Nigerians spent $13 billion per year buying gasoline and diesel to power their generators, thereby constituting a huge dent in the nation’s foreign exchange and consequently balance of payments. Power shortages severely cripple businesses in the country, especially tech firms. The Manufacturing Association of Nigeria claimed that, within a decade, 820 manufacturing companies folded up or moved abroad in just a decade primarily due to poor power supply.

From the glory days to the dismal days

The power of the naira has fallen – it has dropped from being the beacon of African currencies to what many observers consider a currency racing towards zero purchasing power. Over four decades ago, around 26,000 naira could buy a house or an apartment in the United States of America. Today, the same amount is worth just about four cups of Starbucks coffee in America or seven sachets of Walker potato crisp in England. Also, as recently as 10 years ago, Nigerians buying foreign education services in the United Kingdom needed roughly N2 million naira to pay a tuition fee of £10,000. Currently, they will need about N15 million to pay the same school fees because inflation and exchange rates have badly wounded the currency.
Domestic incomes are not insulated. Adjusted for inflation and exchange rates, on average, a Nigeria professor now earns $35 per month, down from over $2,000 in November 2009, the last time the pay was raised. In local currency, their salary has sunk from N342k to N49k. In other words, within 175 months, inflation and worsening exchange rates have wiped out roughly N293k from the take-home pay of the high-earning academics. See the evidence below.
Had the government, the employer of labour, decided to fortify the income of the academics against inflation, there would have been, based on my calculations, an annual pay rise of 4.9 per cent or a monthly pump-up of 0.4 per cent because a professor would need N634k in 2024 to buy what 342k was buying in 2009.
The poor are not spared from the effects of the poor performance of the naira. “Inflation hurts the poor rather than the rich as the rich are better able to protect themselves against, or benefit from, the effects of inflation than are the poor.” The poor, the pensioners and public servants with incomes not indexed to price changes are always at the receiving end of food inflation because they spend over 70-90 per cent of their incomes on food items.
Food inflation in Nigeria is higher than (and rising faster) the general inflation. I observed that all the states with the lowest food prices are in the North (Kano, Katsina, Gombe, Kebbi, Niger) and all the states with the highest food prices are in the south (Imo, Anambra, Rivers, Enugu, Bayelsa). The North ‘feeds’ the south. But ironically the North is not able to feed itself equally well because more than 25 million people (22% of the population) in the North are unable to spend roughly N200 (US$0.48) per day on food, compared to just 4 million (4% of the population) in the south. This suggests that farmers in the north are not benefiting (or seeing their incomes rise) in tandem with rising food prices. Inflation is not transferring wealth from states that don’t produce food to states that do.

A strong currency does not guarantee happy days: evidence from the Abacha days.

There is a widespread notion that a country’s economic performance is linked to the strength of its currency – that the stronger the currency, the better the welfare of the citizens of the country. While this claim may be true for many advanced economies, the Abacha years (1993 – 1998) exemplify that this is not the case for Nigeria. During this period, the dollar was stable at roughly 22 naira for about half a decade in a row, nevertheless, within the same period, the country recorded its highest poverty rate in 60 years: 81 per cent in 1996.
The degree of openness – what economists use to measure the extent of economic relationships between nations – was lower in Nigeria during the reign of Abacha than at any time in the country’s history. This implies that there was no pressure – relative to when democracy returned in 1999 – on the dollar to pay for the imports of goods and services. At this juncture, it is important to note that in a liberalised forex market, if a country continuously spends its international income on foreign commodities than it earns from the rest of the world, it will set its local currency on the glide path of growing weak. This has been the Nigerian situation, especially since 1999. See the chart – the outflow of the dollar has been exceeding its inflow.
Moreover, the return of democracy expanded the size and the cost of running the government – raising total recurrent expenditure. The graph below paints the rise in government spending over the past 20 years, marking a period of massive cash infusion into the economic system in the post-military juntas
The number of those on public payrolls and the corresponding salary and wage bills have risen sharply – from members of the national and state houses of assemblies, and their seasonal aides to additional agencies established to ‘improve’ governance. For the politicians, this has created unfettered access to the public treasury and consequently, avenues to shovel more cash into private pockets. The effect is seen in their purchases of foreign properties through proxies at a scale not seen during the pre-democracy regimes.
The foreign consumption effect induced by the increase in government spending plus the liberalisation of the forex market are deemed the biggest driving forces at the root of the collapse of the naira. Likewise, there was a substantial increase in salaries and pensions of public sector workers in the immediate aftermath of the Abacha era, thus, putting more cash in the hands of Nigerians. This is believed to have driven up the demand for foreign manufactured goods, especially cars.

Combating inflation and stabilising the Naira

In moments of economic distress, governments, via the central banks often employ certain economic tools to deal with their nations’ economic problems.
When the United Kingdom hit double with double-digit inflation for the first time in 40 years (11.1 per cent in October 2022), the Bank of England was able to battle it down to 2 per cent within the space of 45 months. The Bank raised interest rates to an all-time high. To raise interest rates is to increase the cost of money, to make money less available for people to spend and as a result, there will be too few monies chasing too few goods, leading to a fall in general prices. This has worked for the UK, but it is not working for Nigeria.
When Nigeria switched to double-digit inflation in 2015, the apex bank tried to tame it by raising interest rates, but the interest rates had a weak impact on inflation because, after nearly a decade of raising the rates, inflation is still rising. The most effective way is to complement the use of interest rates (monetary policy) with government finance (fiscal policy) – the government should lower its budget and borrowing by cutting wasteful spending, but it is difficult to do so in the run-up to general elections.
Finally, one of the long-term solutions to the falling exchange rate is to facelift four key industrial sectors in the country that will produce and supply local demands for food, clothing/footwear, building materials and pharmaceutical products because these commodities make up over 90 per cent of household non-durable consumptions.

Zuhumnan Dapel is a researcher at the Scottish Institute for Research in Economics in Edinburgh and a former IDRC fellow.

About a fortnight ago, the Nigerian media widely reported that the House of Representatives Committee on National Security and Intelligence recommended, in a report, that the Federal Government should purchase new aircraft for the use of President Bola Ahmed Tinubu and Vice President Kashim Shettima. The House had in May mandated the Committee to investigate the conditions of the aircraft in the Presidential fleet. That assignment followed a motion earlier debated by the House.

Since that House Committee’s report was made public, the issue of acquiring new aircraft for Tinubu and Shettima became a controversy and a running story in the mainstream media and social media. That is normal. But it became a mischief when the President of the Senate, Godswill Obot Akpabio was unfairly dragged into the controversy.

Akpabio was reported to have said things that he did not say. And when he tried to correct the falsehood, the harder he tried, the more vested interests twisted his explanations. Their purpose is clear: mischief.

Let’s go back to Thursday 27th June, 2024, when both the Senate and House of Representatives reconvened to begin a new legislative year of the 10th Assembly. That Plenary was held six days earlier than the date scheduled for the resumption of the lawmakers. The resumption was brought forward primarily for the National Assembly to consider a request by the Executive Arm for an extension of the implementation of the 2023 Appropriation Act and the 2023 Supplementary Budget, which life spans were to elapse on Sunday, 30th of June, 2024.

But some media outfits wrongly speculated that the Plenary was called ahead of schedule for the National Assembly to approve the purchase of new aircraft for Tinubu and Shettima.

It is normal for the media to speculate. But you must admit your error if events prove your speculation to be wrong. Regrettably, some of the leading national dailies involved refused to admit that they goofed. Instead, they tried to justify their error with falsehood.

At the said Plenary, the Chairman of Appropriation Committee, Senator Solomon Olamilekan Adeola, spotted an online report with the headline: “Presidential Jet: Senate Holds Emergency Session to Consider the Supplementary Budget.” He drew the attention of the Senate to the report and requested permission to read out its first paragraph. It reads:

“The Senate held an emergency session to consider President Bola Ahmed Tinubu’s Supplementary Appropriation for 2024 fiscal year which includes funding of acquisition of a new Presidential Jet.”

The Senator said he was embarrassed by the report because it is false. He then moved a motion for the reporter of the story to be invited for his explanation before the appropriate committeeof the Senate. The Senate unanimously granted the prayer.

The Leader of the Senate, Opeyemi Bamidele, had earlier seen a similar report in the social media and also drew the attention of the Senate to it. In response to the observations made by Senator Bamidele, the Senate President narrated his own experience to his Distinguished colleague Senators.

However, Akpabio’s intervention immediately became another issue in the media. He was largely misrepresented. Most of the headlines did not match the stories on what he said. In some cases, the reports were embellished and took Akpabio’s contribution out of context.

The comments made by the Senate leaders at the Plenary were basically the same. That no request for the purchase of new aircraft for the presidential fleet was before the Senate. That in the event of any such request in future, the National Assembly would look into it. That blackmail and propaganda by vested interests would not distract lawmakers from their statutory responsibilities.

Alas!, these comments curiously gave birth to headlines such as: “No Amount of Blackmail Will Stop Senate from Approving New Presidential Jet – Akpabio,” “Blackmail Can’t Stop Presidential Jet Approval – Senate,” “Akpabio Insists on Approving Purchase of New Aircraft for Tinubu, says No Blackmail will Stop Decision,” “New Presidential Jet: Tinubu’s Wish, Senate’s Command – Akpabio.”

To put the record straight, the verbatim recording of the remarks of the Senate President and Senate Leader is hereby provided to enable readers ascertain the truth and determine if those screaming headlines captured the comments of the Senators at the Plenary on Thursday 27th June, 2024:

Senate Leader, Opeyemi Bamidele

“Mr President, this Senate is aware of some insinuations in a section of the media to the extent that the President of the Senate, leading this Senate, either had, at one time, indicated that we had a request that the purchase of a new plane be approved for Mr President and that President of the Senate had indicated that regardless of what Nigerians were going through, that would be approved. The Senate is also aware that Mr President tried to clarify this issue, that at no point did he say that. Then another section of the media picked on that again to say the President of the Senate, leading the 10th Senate, has said whatever Mr President likes, he should go and do, this Senate will not approve the purchase of a plane.

“And as we sat here today, a section of the Social Media has also been circulating that we had gone into executive session to discuss Presidential request for a new plane and how we are going to approve it. Mr President, the essence of my saying this is just to make it clear and to alert Nigerians that there is the presence of the fifth columnist and some other propagandists who are doing everything possible to destabilize this country and also destabilize the parliament.

“Mr President, I say for the record as the leader of this Senate, that there is no request before this Senate as of yet. So there couldn’t have been a basis for us to debate whether we are going to approve or not. It had never been discussed either on the floor of this Senate or among individual senators or the executive session. There is no such request. If the request comes, it is not about Mr President of the Senate alone. It is for 469 elected representatives of the Nigerian people to discuss and take a position – 360 in the House of Representatives, 109 in the Senate. But as we speak Mr President, there is no such request and I just want all of us to be clear about this.”

Senate President, Godswill Akpabio

“It is not good for us to run the Senate by answering people in the Social Media, because the social media is garbage in, garbage out. I was in Zanzibar, attending Inter- Parliamentary Union meeting when that information went out, that the Senate President has said that he would approve a brand new plane for the President irrespective of whether there is suffering or no suffering. There was never a time such statement came from me because I have never had any correspondence to approve a plane or not approve a plane.

“I did not want to answer but they went further to generate it as if I was saying that I did not care about the Nigerian people. We care about the President. We care about the Nigerian people. We will approve things that will benefit the Nigerian people. We will approve things that will improve the living standard of the people. At the same time, we will also take cognizance of the duties of Mr President. If his vehicle is bad, we will repair the vehicle. If his plane is bad we will approve money for the repair of the plane. So that is not an issue. There is nothing before us. I don’t think we should bother about it.

“Somebody called me and he said that he was quoting from BBC, that what I said at Senator Tahir Monguno’s house, that the statement was false and should be disregarded. That I was saying that I would not approve. That is what you may call anticipatory blackmail. The purveyors of the story know very well that maybe there is problem with the Presidential fleet and that where they will go to will be the Parliament. And so they are now trying to do anticipatory blackmail, to tell us if they bring it, do not look into it. I think we should ignore them and focus on what we are doing here.

“I have read the President’s correspondences to us, there was nothing touching on plane or no plane. But I can tell you that when you hear stories such as the death of the Vice President of Malawi as a result of defective plane and you hear stories such a as the death of the President of Iran as a result of defective craft, in fact this time it was helicopter, and all that, we shouldn’t ever dream and allow such to be our portion. It won’t be.

“The Senate is very responsible. The National Assembly is very responsible. We will look into issues that will benefit the governance of the country irrespective of anticipatory blackmail. Get the words, anticipatory blackmail. They know very well that something like that may come in future and if it is a necessity, the Senate will look into it. But there is nothing like that before us now. So they can go ahead to anticipate and blackmail the Senate President, it will not affect me.”

***Awoniyi, Media Aide to Senate President, wrote in from Abuja.