A few years ago, I asked my boss how he has been able to write about Nigeria year in, and year out, knowing that the same stories repeat themselves. Think about it, some people have lived long enough to see what happened in 1979 happen in 2023, and what happened in 1983 happen in 2023. How do such people keep hope alive?
I am very young, but I wrote articles about the naira depreciating from N162 to the dollar to N197 just before President Goodluck Jonathan left office in 2015. It felt like the heavens would fall in 2016 when the dollar traded for N283. As of 2019 — four years ago — we still bought the dollar for N367. So you can imagine my lack of motivation to write about a dollar at N1,200. I’m screaming silently.
In my reporting of the naira, and issues around the naira, I know that whenever the naira was close to N1,000, the Central Bank of Nigeria (CBN) intervenes in the market to make sure that does not happen. In 2022, during the early days of naira redesign, politicians were changing their old naira notes for dollar bills, thereby causing some scarcity of the dollar in the market.
At the time, the naira went very close to N1,000, but the CBN, as led by Godwin Emefiele, made sure that it never hit that negative milestone. In 2023, after Emefiele’s suspension, the naira, following the announcement of rates unification was approaching N1,000 to the dollar, but the acting CBN governor stepped in and stemmed the tide.
Remember the press conference he had at the state house after seeing President Bola Tinubu in August when naira traded for N950 to the dollar? He said speculators would suffer losses, and somehow, the CBN brought us back from over 950 to below 900.
SO, HOW DID WE GET TO 1,000?
Following historical trends, I had always said to my friends that before the naira hit N1,000 CBN would step in. So as the naira inched closer to N1,000, they asked me what my thoughts were, and my response was: I don’t know.
Sincerely, I did not know what to expect. If I remember correctly, a new CBN governor had just been appointed, and the president was away at the United Nations General Assembly when this happened. The new governor, Yemi Cardoso, had not said anything publicly at the time, and we were not clear about what his priorities would be.
When the naira eventually crossed N1,000 — I was both sad and relieved. Sad that we finally hit that negative milestone, relieved that I did not give bad financial advice. I believe the parallel market took advantage of the times to get to N1,000.
Cardoso, whom Tinubu refers to as the Headmaster, would later come out to say CBN, under his leadership will stop development finance and focus on core mandate. Rest in peace, Anchor’s Borrowers Programme.
Cardoso’s CBN also lifted the ban on 43 items, which many of us have canvassed for repeatedly for years. It was good to see that happen, but the consequence of that policy is naira at 1,200 to the dollar.
WILL NAIRA RETURN TO 700 PER DOLLAR?
The most popular question used to be: Will the naira ever return to 500 per dollar? But the times have changed, and we have shifted the bar. It takes so much hope to believe the naira will ever come back to 700 per dollar.
Historically, however, the naira has recorded a few drastic recoveries in the past, which can tell us what is possible in 2023. In 2017, the naira recovered from 520 to 360, appreciating by 30.8% against the dollar.
In November 2022, the naira depreciated to as low as 860 per dollar, only to appreciate to 710 per dollar a few weeks later, recording an appreciation of almost 20 percent.
If we are to go by these scenarios, a similar naira recovery will bring the local currency to a best-case scenario of 840 per dollar and a worst-case scenario of 960 to the greenback. Based on these projections, N700 per dollar may be gone forever.
There are many more factors that affect currency fluctuations, some of which we may not be able to explore in this article. This is to say, this may be an oversimplification of the foreign exchange situation in the country. A lot of the fundamentals are, however, not changing — but the information management in the system keeps setting us in dire straits.
The speculators know that the CBN does not have the financial muscle to fight back; oil production is not providing enough forex; we have an outstanding forex commitment in excess of $6.8 billion. Afriexim’s $3 billion is not looking to come in soon. We are between the rock and a hard place — but in our case, the hard place is a rock too.
The data saves; it’s the hope that kills. What the data is saying is that N700 per dollar may be gone for the foreseeable future.
You can reach Mayowa on Twitter and across other social media channels @OluwamayowaTJ