From the moment President Bola Tinubu’s government floated the naira, it has had a mixed run of swings. Although in recent times, it appears to be hovering around 1,700 to the American dollar, just as the Central Bank of Nigeria recently announced a successful rise of the country’s foreign reserve to $40 billion. This is commendable, but not enough.
CBN is proud of this achievement because peripheral economies, who mostly buy strategic consumer goods, have always found it necessary to accumulate the convertible currency to enable them to fund importations for at least six months.
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Bismack Rewane, Managing Director of Financial Derivatives Company Limited, has declared, “There is no justification for the naira to be trading less than 30 per cent of its fair (market) value in less than twelve months,” as he observes that “The differential between the parallel market and the official market rate (of exchange) has virtually disappeared.”
He is of the opinion that if the production of petroleum can increase to at least 1.55 million barrels per day, the naira should be stronger, correctly adding that the high exchange rate is the major cause of the current run of high inflation in Nigeria.
Even the International Monetary Fund agrees that the naira is getting stronger. In its October 2024 Global Financial Stability Report, it argues that the naira is showing signs of stabilization, if it is not already gaining strength.
If anyone wonders why the IMF suddenly has a sanguine assessment of the naira, seemingly contradicting the World Bank that classified the naira as one of the weakest currencies in sub-Saharan Africa as recently as August 2024, they should look no further than Nigeria’s recent streams of long overdue remittances due to multinationals that the World Bank said was a major cause of the weakness of the naira.
The CBN’s report that its foreign debt servicing was $3.57 billion between January and September 2024, up by 39.7 per cent, from $2.56 billion, for the same period in 2023, is good news to the ears of Euro-Americentric IMF and World Bank that look out for the interest of the West.
But we all know that inordinate demand for convertible currency to pay for the importation of strategic consumer goods, like petroleum products and foodstuffs, would naturally weaken an economy that is essentially import-oriented.
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Interestingly, Rewane omitted the big elephant in the foreign exchange room, the Dangote Refinery that can probably supply all petroleum product needs of the country. That should have further confirmed his thinking that the naira will be stronger by January 2025.
After several months of feints and thrusts, the 30,000-member Independent Petroleum Marketers cartel that runs about 150,000 retail outlets throughout Nigeria has finally concluded arrangements to buy Dangote Refinery’s petroleum products.
But no one can tell whether the negotiations were guided by the willing-buyer-willing-seller template prescribed by the Petroleum Industry Act of 2022, or a price fixing between the Dangote monopolist supplier and the IPMAN cartel monopsony buyer.
The immediate advantage of this development is that landing costs of the products that have reportedly been shaved by 20.34 per cent, will be reflected in significant drop of the price of the petrol, which has been reported at N971.57 in this month of November.
But some watchers fear that the oil sector Svengali – within Nigeria National Petroleum Company Limited and other agencies of the Ministry of Petroleum Resources – will somehow prevent these gains from being passed to Nigerian consumers.
Although IPMAN hints that it can shave off N50 from the price of petrol that its members recently received from Dangote Refinery, the Nigerian Bureau of Statistics is already prognosticating that high fuel prices will still join the recent flooding that disrupted farming timetable, especially in the Northern Nigeria, and the depreciation of the naira as major contributors to headline inflation.
Nigerians must be wary of the Svengalis of Nigeria’s oil sector, who are powerful enough to upset the applecart and compromise the patriotic and brilliant Dangote Refinery arrangement that should easily wipe off as much as 40 per cent of Nigeria’s demand for foreign exchange, and strengthen the naira.
Even Pastor EA Adeboye, General Overseer of The Redeemed Christian Church of God, arguably the biggest church in Nigeria, can see that the oil cabal is conspiring against the successful operation of Nigeria’s refineries (which include those owned by NNPCL, Dangote and others).
We regard successful operation of the refineries of Dangote and others as critical contributor to the economy. Government must find a way to increase domestic industrial production and reduce foreign debt servicing burden. We believe as these steps significantly contribute to the reduction of Nigeria’s inordinate demand for convertible currency, the naira will be stronger.
