Forex crisis: Naira plunges to 1,025/$, job losses, factory shutdown loom

The naira fell further on Tuesday as it exchanged for the dollar at the parallel market between 1,005/$ and 1,025/$.

Owners of small-scale enterprises, Nigeria Employers’ Consultative Association, and manufacturers, who spoke, expressed concern about the falling value of the naira, warning that it would lead to the shutting down of factories and attendant job losses.

The naira has maintained a downward trend since the Central Bank of Nigeria allowed a free float of the national currency against the dollar and other global currencies in June.

This decline has further led to manufacturers struggling to get raw materials, with more companies planning to sack more workers or shut down.

With the declining naira value, manufacturers are faced with cutting production, jobs, and raw material imports.

Naira hits 1,025/$

Bureau de Change operators in an interview, said the naira exchanged for the dollar at the parallel market between 1,005/$ and 1,025/$ on Tuesday.

A BDC operator in Lagos, Yusuf Kareem, who spoke to one of our correspondents, stated, “We bought for N1,005/$ and sold for 1,025/$ on Tuesday. The money is still scarce. The value of the naira has been falling.”

“The naira was traded at 980/$ two weeks ago, but today, it is 1,020/$. We don’t know what will happen tomorrow because it has not been coming down.” Another BDC operator in Lagos, Musa Yunus, said,

Another BDC operator in Lagos, who simply identified himself as Idris, said, “I am not sure you can buy up to $1,000 from me now because it is not available. We buy at the rate of 1,000/$, but I sell at 1,015/$.”

Babangida, another BDC in Lagos, said, “I sell for N1,010 per $ and buy at the rate of N1,000.”

But the Assistant Provost, Association of Bureau De Change Operators, Zone 4, Wuse, Abuja, Muhammed Nera, said the rate closed at 1,015/$ on Tuesday.

“As of the close of business, we were buying at N1,010/$ and selling at N1,015/$. But I can’t say what the rates would be tomorrow (today).”

On the Investors & Exporters forex window, official figures from the FMDQ showed that the naira fell slightly and closed at 765.83/$ on Tuesday from 765.02/$ on Monday. The official market recorded a total turnover of $60.30m.

SMEs, manufacturers lament

The Chairman of the Nigerian Association of Small and Medium Enterprises, South-West, Dr Solomon Aderoju, in an interview with one of our correspondents, said the forex crisis would kill many industries.

According to him, the cost of production is increasing following the falling value of naira.

“When the SMEs produce, they won’t be able to sell because the purchasing power is eroding and people are not buying, he stated.

“Some of us that have borrowed money from the bank will not be able to honour our obligation. It’s a multiple problem. They will not be able to service the loans. Some of us import our raw materials from other countries, which means the cost of raw materials will also be mounting. These problems will kill SMEs. As I speak, many businesses have closed shop because of these problems.”

He added that businesses were also battling other challenges, such as high fuel costs.

“This is not only the problem. There is also the cost of fuel and other issues we are battling with, such as the lack of marketability for our product. We have foreign products contesting with our local products in Nigeria. Some of these products are not even of high quality like ours, so there is no way to benchmark them because they are cheaper.

“And that is what is giving us concern over the African Continental Free Trade Agreement, which former President Buhari signed. If we are now having borderless transactions, that means other countries can now come here and bring down their product, which will be cheaper than our own,” he added.

The Chairman of the Nigerian Economic Summit Group, Mr Niyi Yusuf, also identified some major consequences of the declining naira value.

“This will lead to increasing imported inflation as prices of imported items will increase while also increasing export income in naira for those who export goods and services.
“If we export more than imports, the net effect will be positive. High import prices can also help to moderate demand for some imported items in the medium term.”

The Director-General of Nigeria Employers’ Consultative Association, Mr Adewale Oyerinde, while speaking, said the primary focus should be how the government would address the challenges related to foreign exchange.

“Presently, the forex situation poses a significant obstacle to procuring essential inputs and is causing disruptions in our financial projections. The escalating forex issue is hindering progress, and until it is resolved, our endeavours cannot take flight.”

However, a facilitator with the Nigeria Economic Summit Group, Dr Ikenna Nwaosu, said many companies would shut down because of this.

“It will lead to some companies shutting down. First of all, if the cost of production and the cost of their raw materials exceed a certain stage and they can’t sell their final products because the market doesn’t accept a certain price, then they will end up losing. So many people are going to stop production and that means there would be unemployment, maybe temporary unemployment. They could close down for some time, so there would be a snowball effect. It will lead to companies closing since the Federal Government has closed all special windows for foreign exchange. Finally, it will impact the educational sector because, for students who are going overseas, there is no special window for them. They used to buy at a special window but now they are buying at the open market.”

Nwaosu lamented that the constant rise in the dollar rate would lead to a rise in the price of petroleum because of the purchasing power.

“The next thing we will hear first is that the price of petrol will rise because of the cost of purchasing it. Secondly, the exchange rate for calculating import rates by the Nigeria Customs Service will rise. It will rise again, and once that happens, there will be a rise in import duty, and at the end of the day, the price increase is passed to the final consumer. It is also going to add to inflation, and with the rise in the price of fuel and rise in import duty, the rise of food will go up. And it means that the negotiation for the minimum wage would be stiffer. Nigeria Labour Congress is saying N200,000 as minimum wage. If the dollar is like this, what will happen? So these are the key impacts of this high dollar rate. I recommend that there should be a direct intervention from the CBN. The president’s instruction that the CBN should hand it off and let market intervention take over is not working for us. And, mind you, the war in the Middle East will worsen our high dollar rate.”

A chieftain of the Association of Nigerian Licensed Customs Agents, Mr Pius Ujubuonu, said, “The systems have been paralysed already, especially the freight forwarding sector, including the seaports, land borders and airport. Before now, what we used to pay, say N2m, has jumped to N7m, and it is not healthy; it is killing businesses. If this continues like this, I am not sure there would be any import in the coming months and many cargoes would be abandoned.”

Reps plan probe

The House of Representatives on Tuesday directed the Committee on Banking Regulation to probe the use of the dollar and other foreign currencies as legal tender for domestic transactions in Nigeria.

It also called on the CBN to address the impact of the failing Naira against the Dollar and other currencies by implementing monetary policy adjustments to stabilise the currency, address speculative activities in the forex market, and increase the withdrawal limit of the naira to reduce the pressure on dollars and other foreign currencies.

It further urged the Federal Government to formulate policies and structural reforms to reduce corruption and promote economic diversification within the nation’s economy.

The resolution to investigate the use of the dollar and other foreign currencies in Nigeria as legal tender for domestic transactions was a sequel to a motion moved by Ismail Dabo (APC, Bauchi) on Tuesday during plenary.

Moving the motion, the legislator said the naira continues to fall against major currencies since the unification declaration by President Bola Tinubu because of the scarcity of forex.

Dabo said the country’s inability to earn sufficient forex means that the naira could further slide down, causing crippling inflation. He noted that oil theft had further depleted the ability of the country to earn foreign exchange.

“The president’s intention is to allow market forces to determine naira value, but the alarming exchange rate has impacted Nigeria’s economy, causing untold hardship due to increased demand for dollars and a dollar shortage.

“About 90 per cent of Nigeria’s total export earnings are from oil, which is the mainstay of the country’s economy, but changes in the price of oil around the world have a big impact on the country’s foreign exchange market. This explains why the naira has continued to depreciate,” according to him.

“A weaker and depreciating naira could increase Nigeria’s external debt servicing costs, potentially reducing government spending on critical s