So the naira keeps receiving a beating from the dollar, seemingly unabated and not ashamed. Really it’s interesting how within two years, the naira has depreciated continually, falling from 197 to N518, seeing the naira depreciate massively against the dollar. The recession is really biting deep.
Now nobody needs to be told all this, because we all are witnesses. What we should do to revert this steady depreciation is what I am here to examine. This is why we need to take into context, how we arrived at this point. How we willingly walked into recession, what the government has been doing and what actually should be done.
So first we need to understand how currency exchange works. A currency exchange is the rate at which one currency is exchanged for another. It is also regarded as the value of one country’s currency in relation to another currency.
So why is the naira falling in value against the dollar? The Nigerian Bulletin explains it subtly here.
What has the government and CBN done?
- Banned 41 items
- CBN increased interest rates to 14 %
- CBN floated the Naira
- And now the CBN will be providing banks with $20 million dollars weekly, while pegging the exchange rate for School fees and PTA (Personal Travel Allowance) at N375
- And what Mr. President himself said during his independence speech last year which you can read here.
What has however happened has been a skyrocketing of goods and services, a serious concern for security and an apparent “gag” on freedom of speech by security agencies, with the naira taking a serious beating from the dollar and other currencies. Worse is the 2017 budget which sees recurrent expenditure more than capital expenditure, with recurrent expenditure being 2.98 trillion naira and capital expenditure 2.24 trillion naira.
Are these going to take Nigeria out of recession? I wouldn’t really know as am not an economist, but I can however juxtapose this administration’s efforts against that of former US president Barrack Obama and how he turned around the dire economic situation of the US.
Some might say the US is far advanced and better structured than Nigeria, but my intent here is to show what was done and how it was done and ponder on why we are not taking that route.
When Obama was sworn-in in 2009, the US economy was in deep recession which had started in 2007 (The Great Recession and Subprime mortgage crisis). Obama’s administration first continued with the banking bail out and most importantly “enacted an $787 billion stimulus program, the American Recovery and Reinvestment Act of 2009 (ARRA)”.
So in essence what did the Obama administration do and what was the outcome?
- Bail out banks
- Enacted a stimulus program
- Enacted the Dodd-Frank Wall Street Reform Act
- Bail out the Automobile industry
- Extended Tax Cuts and addressing income inequality in terms of Tax Income
- Reformed Healthcare
- Keep interest rates low
So the outcome of his measures listed above and those not listed ensured a turnaround of the US economy which had witnessed loss of jobs saw job creation amount to 15.2 million by October 2016.
Now, its easy choosing the US, but like some will rightly point out, the US is a manufacturing giant, bla bla bla.. Yes I know, but the measure taken by the Obama administration can actually be taken by Buhari’s with results. If Buhari is sincere about changing Nigeria, then he should come out with a plan such as that of Obama, and stop this trial by error method.
A critical look at the 2017 budget shows that education takes a back foot compared to other “key” sectors, whilst agriculture does not fare better. Of course, Education gets a budget of 50 billion naira while Power, Works and Housing gets 529 billion naira for their capital expenditure respectively.
Any country hopeful of developing, hopeful of leading the world places premium on Education, Health Agriculture and industry, and one would expect any serious government to set its priorities straight regarding these sectors.
Can Nigeria come out of recession? Can the naira rebound against the dollar? Can the high cost of living reduce? Yes, but only if Buhari can come up with a viable plan just like Obama and implement the plan. Till then the naira will keep falling and the cost of living will keep rising.