THE MYSTERY BEHIND THE FALL OF NAIRA:.
The coming together of countries to exchange goods and services is an ideal proof that no country or state is ever self-sufficientas no man can ever live in isolation either economically or even more extensively. The need for national and international relations is indispensable which can as well be said to be man’s essence and sustenance as itcan be traced to the beginning of man’s existence, not forgetting the birth of the barter trade. International trade has spun into much more of a significant trade since practically every country now is concerned with the allocation of scarcemeans with alternative uses. Therefore, international trade predominantly suggests the meet of import and export and the forces, either directly or indirectly, influencing the flow of receipts and payments known as the foreign exchange.
We can rightly put that the rise and fall of a country’s currency is determined by the interplay between demand and supply in an international market..Nigeria has been one of the biggest producers of oil globally,sitting almost uncomfortably at twelve in the CIA Factbook ranking of top twenty global producers of oil in 2014*. Nigeria’s crude-oil discovery for commercial purpose began in 1956 and led to a boom in 1970*. Ever since the escalationthat showered in an era of abundance, there has been no going back with the commercialisation of crude-oil at the expense of the primal agriculture and other non-crude generators of economic substance. This has led, in no small way, to the dependency on crude-oil, and to the extreme when over 90℅ of Nigeria’s exports constitute of crude-oil, scoring 25℅ of the Gross Domestic Product and 80℅ of government total revenues*. The effect can always be seen in Nigeria’s unfavourable balance of trade, giving way to locally manufactured goods been thought as giffen, the bandwagon effect, snob effect and the effect of Professor Veblen. This has also had direct effect in the generation of employment and would go a long way in dictating the standard of living of the people..Not until the fall of the currency would this actually be discerned, even when though it has been predicted. The need to correct economic maladies is seen more of a conceptual approach rather than a pragmatic one with proactive measures. Jeffrey Sachs was in fact a seer when he said:.’The longer you wait, the less fun. If you wait until the bitter end, the whole economy can be destroyed.’.
The reasons behind the fall of the country’s currency could not be far-fetched: the growing demand for foreign currencies borne out from the internal growing demand for imported commodities, and the low rate at which the country’s currency is being demanded for by external countries with minimal whims for exported commodities. Simply put, the country’s currency has no establishment in international market when little or no country demands for her goods ready to be exported. This is one main reason whythe performance of the currency largely depends on the performance of crude-oil as that is the only major means of Nigeria’s export. The fall of the country’s currency might worsen when India, a major buyer of Nigeria’s crude-oil, decides to start purchasing from the returning country, Iran, who with million barrels of crude-oil that have been reserved since its eviction from the global stage with factors pertaining to nuclear weapon, may decide to lower its prices for crude-oil which of course is allowed..Even before a worse could happen, unless prevented, Nigerians are already experiencing a worst.
The hike of the dollar is having a more than considerable effect in the lives of the people. The most recent blow is the increase in the price of sealed waters among others which has kept people questioning the influence of the dollar hike on sealed waters.The theory is plainly simple: because there is a rise in imported goods, there would be a rise in consumption and purchase; because those are the grassroots of production and exchange, there would be a rise in almost everything they procure. These are more like the cost incurred in the production of a utility. It can as well be termed a cost-push inflation except not to the extreme..Every sickness has an elixir, as every illness with its cure. To curb this menace, Nigeria is left with a variety of options.
The clamour for the localisation of some commodities which has been duly induced is a good process towards partial elimination of the naira’s outrageous fall. Although this would to some extent improve the standard of living of the people with the generation of job opportunities, it would also discourage foreign investors, manipulating some of their processes which would serve as a blot on the operation of Nigeria’s economy as a mixed one.
This may in the long run lead to socialism. The Central Bank Of Nigeria can also be made to print out more money, devaluing the national currency in that process. More money in circulation would lead to more ownership of utility, reducing the risks of foreign currency, as much as it would lead to inflation which may be the podium towards subsequent falls of the naira. Another measure that could be taken is allowing the force of demand and supply to take its toll. Allocating resources to where necessary and making use of rules and regulations, deductions and inferences, towards the strengthening of the naira.
.This situation is double-edged, and may be attributed to the perspective of a student who says the widespread of the naira against the dollar is a curious phenomenon as any outrageous one would be. Its overwhelming and stifling could probably be the torchlights towards the growth of our economy or the broken mirrors reflecting one of our remarkable economic downfalls in recent years. Either way, we would still be left with the fundamentalism of logical thinking towards allocation of scarce means and the exponential function of rational choice in the understanding of Economics and application of economic methodology to our economy.*******************************
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