Growing up, my mum regularly talked about the good old days. Days when people could move about freely without fear of getting kidnapped; when travelling and spending money abroad was cheap and when 1 naira was almost worth as much as 1 US dollar. As my mum regaled me with these tales, I couldn’t help but wonder
Years later, while taking a mental break from work and aimlessly browsing the internet, I clicked on several random links (as you do) and found myself on Nigeria’s wikipedia page. On this page, I saw the table below and almost fell out of my seat.
Even though I remembered my mum’s words, I still was not ready for the chest pain and the minor fever I started to run upon seeing this. These discomforts lasted for several minutes and eventually gave way to anger – anger at the leaders who consistently messed up the economy and the generations before us that allowed this to happen. So, how did we get here?
One of the answers to this question is our large infrastructure deficit, especially power supply. You see, we cannot build our economy without policies and infrastructures that encourage the exchange of goods and services. A major infrastructure, uninterrupted power supply, is currently very expensive to maintain. In fact, we are so used to poor power supply that when we have up to six hours of power, we are immediately sceptical and start hoping that ‘NEPA would take the light’. To deal with this, the average Nigerian business has a generator to try and fill in the gaps where the government fails. These generators are powered by diesel a fuel derived from petroleum and can get quite pricey. As a result, it very expensive to manufacture goods which makes us rely heavily on imports for products that we can produce locally (#shameonus).
Obviously, the sellers of these products usually want to trade in USD or their local currencies as the only people who need the naira are Nigerians living in Nigeria. Furthermore, it is clear from the table above that these rates have gotten worse overtime. These sellers can therefore see little to no benefit of dealing in naira and if people do not want to hold a commodity, be it precious metals or money, it reduces in value.
When the oil prices fell in 2014 and with it the value of the naira, I selfishly thought that I would be able to go on holiday in Nigeria, live like a boss and enjoy myself as my earnings were denominated in Great British Pounds.
However, I realised that the people I was going to spend time with earned naira and were more directly affected by the state of the economy. Unless I included their expenses in my budget, they would have to make up for the amount they spend when I leave and of course, they were not willing to do that. This was one of the effects of the fall in exchange rates that was not anticipated.
From the table, it is prudent to assume that the exchange rate will get worse. So when planning for your holiday to Zanzibar in a years time, or your masters degree or if like me, you want to take a break in Nigeria and enjoy your time with family and friends without worrying about the cost, don’t forget to consider this in your budget.