Every country has its own challenges and faces tough times resulting mostly from economic crisis, religious or tribal war, natural disasters and the likes. Each country equally has its own way of handling the challenges presented each day for the constant the growth of the country in particular. With the recent naira devaluation, Nigeria has proved to have more problems to trash out than imagined. Recently, the Monetary Policy Committee (MPC) of Nigeria’s Central Bank devalued the country’s naira from N155 to N168 with Bureau de Change (BDC) rates reaching up to N208 to a dollar. With the highly noticed fall in global oil prices and the depleting foreign reserves, The MPC has run out of options on how to stabilize Nigeria’s economy. This general economic decisions have intense micro-economic implications given that Nigerians will certainly see the effects in their wallets starting from the worth of the cash they have at hand to their ability to borrow.
1. Your 1000 Naira is now Equal to 900 Naira:
Although your N1000 is still N1000 in amount, its worth is no longer the same. Initially when naira wasn’t devalued, Nigeria’s fixed foreign exchange rate was pegged at N155 to $1, but Nigeria’s foreign exchange rate has been raised and is currently fixed at N168. This 3.89 percent increase might actually seem slight to many but it is not because it means the same percentage decrease in the worth of your cash and hence one would need N1000 for what was previously worth N900 so you simply lost N100 for every N1000 you had overnight.
2. Naira-Dollar Beat Down:
The aforementioned decrease in worth is viewed as being minor when compared to other effects in a more literal sense because, the floating exchange rate (market driven rate) makes it even worse. The market driven rate or in a more simple sense, The rate that Bureau de Change charges for a dollar is currently pegged at close to N200 – $1, falling almost 20 percent in since the announcement was made in November, and economic analysts estimate it could even fall further to N210 – $1.
The implication is that the worth of N100,000 crashes even lower when using Naira in transactions that directly involve the dollar. For instance, shopping online from the US. However, MPC made the naira devaluation decision to stabilize the free fall in the floating exchange rate which according to CBN Governor Godwin Emefiele, is the most useful and feasible policy option available especially at this time of increase in demand for foreign exchange and decrease in the price of oil.
In addition to this statement by CBN Governor, the Head of African Research at Standard Chartered Bank, Razi Khan told Reuters that the body responsible for regulating money made the appropriate move by making a slight increase in the official mid-rate which was N158 -1$ to the current mid-rate pegged at N168-1$ considering the higher inter-bank rate which to a great extent is market determined.
3. Your Shopping Just Got More Expensive:
The Naira’s devaluation will certainly result in steady inflation in the economy and this will invariably make your groceries more expensive. So darlings expect a constant spike in the prices of most of the things you purchase every now and then. Besides analysts estimate, Nigeria may suffer a double-digit inflation, and some other persons predict a rise to 10.5 percent from the present 8.1 percent.