The naira has been on a downward trend since the Central Bank of Nigeria allowed it to float freely against the US dollar and other major global currencies in June.
The declining value of the naira is affecting manufacturers who are finding it increasingly challenging to access raw materials. As a result, some companies are contemplating laying off workers or even shutting down their operations.
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Naira plunges further to the dollar. Photo: BBC[/caption]
Bureau de Change (BDC) operators are reporting rates of 1,005 to 1,025 naira per US dollar in the parallel market. The value of the naira has been falling steadily, causing concern among both operators and the general public.
The Chairman of the Nigerian Association of Small and Medium Enterprises, South-West, Dr. Solomon Aderoju, expressed concerns that the forex crisis could have a detrimental impact on small and medium-sized enterprises (SMEs),
Punch reports.
Rising production costs, reduced purchasing power among consumers, and difficulties in servicing loans are among the challenges faced by SMEs. Additionally, the cost of imported raw materials has increased, further affecting production costs.
The depreciation of the naira also raises concerns about the competitiveness of local products in the face of foreign competition, especially in the context of the African Continental Free Trade Agreement.
Cheaper foreign products could potentially flood the market, making it difficult for local businesses to compete. The Chairman of the Nigerian Economic Summit Group, Mr Niyi Yusuf, also identified some major consequences of the declining naira value.
He said, “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.”
Also speaking, the Director-General of Nigeria Employers’ Consultative Association, Mr Adewale Oyerinde, said the primary focus should be how the government would address the challenges related to foreign exchange.
Folashodun Shonubi, the Acting Governor of the Central Bank of Nigeria (CBN), had earlier announced that the
apex bank is poised to clear all outstanding forward contract debts owed to banks in the coming weeks to boost the value of the Nigerian currency.
While the specific total of these outstanding dollar debts was not disclosed by Shonubi, a recent report by JPMorgan, a U.S.-based bank, estimated the CBN’s total forward contract debt at $6.84 billion.
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