Entrepreneurs, salary earners and housewives should brace for greater pressure on their budgets, as the naira continues to experience a free fall when paired with the United States dollar.
Some financial and economic analysts drew this conclusion in separate interviews with SATURDAY PUNCH on Friday while weighing the implications of the ongoing currency devaluation for the ‘ordinary’ citizen.
The naira has consistently weakened on strong demands for the foreign exchange, which only receives limited supply.
A week-long assessment showed that the naira closed on September 28, at N158.45 to the US dollar on the inter-bank market; but recorded an all-time low of N159.75 to the dollar at the close of activities on September 29.
As at October 6, the naira had fallen to a new record low of N164.85 to the US dollar.
Financial analysts have said that if the naira maintained the current rate of devaluation, it would exchange at between N180 and N200 to the US dollar by the end of 2011.
A financial analyst, Mr. Ola Ogedengbe, said that as long as the Nigerian government failed to strengthen the real sector of the economy through the provision of energy, tightening the borders and granting friendly duties on importation of raw materials for manufacturers, the economy would not be healthy.
He said the behaviour of the naira was a replica of the weakness and instability of Nigeria’s economy.
Ogedengbe said, “There is no way the naira would not depreciate. The problem is primary. The real sector is not working. We import substandard versions of things manufacturers strive to produce locally, thus destroying the market for them.
“As the naira falls, importers of all categories will require more volume for foreign exchange. If the Central Bank of Nigeria allows the depreciation as it is now, N180 to N200 is in view.
“The consumer then bears the brunt, because the difference in the cost of doing business is ultimately passed on to them. Prices of goods and services will definitely go up because people are in business to make money. Even people who send children to study abroad will pay more. Whichever way, Nigerians will be the losers.”
Another financial analyst and stockbroker, Mr. Jire Oyewale, said that for a long time, it had been difficult to measure the real effect of economic policies on the economy and the capital market.
He said that even if this were to be an official move to devalue and stabilise the currency, the usual problem of policy inconsistency might soon rubbish it as measures would soon be taken to check it.
Oyewale said the current trend might further plunge the naira to N200 to the US dollar. If this is done, he added that it would erode the value of salaries earned; even the N18,000 minimum wage, as prices of goods begin to skyrocket.
He said, “We expect that if petroleum subsidy is removed, the government should redirect the funds to other sectors to assuage economic hardship, but what you find is that the money is taken overseas. People that matter are not interested in growing this economy; that is why it is so weak.
“We don’t even need foreign investors as much as people make it appear because so much can be achieved with good, consistent and committed economic policy directions. My position is that if the end does not justify the means, CBN policies are a mere rhetoric.
“The prices of goods will further go up because we do not operate a closed economy. As long as people can pay the required duties, they are free to import just anything into Nigeria, how then do the local manufacturers survive?”
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