According to a recent article published in a report, it has been revealed that Nigeria is on the edge of another surge in the prices of commodities. Francis Meshioye, the President of the Manufacturers Association of Nigeria, expressed to the media that unless the Naira strengthens against the US dollar, there will be a widespread escalation in the prices of goods throughout the market. According to Mr. Meshioye, sustaining profitability seems unattainable given the current exchange rate.
The initial hurdle lies in achieving a break-even point, which would result in elevated prices amidst a lack of purchasing power due to insufficient income. Consequently, people are unable to afford things as they should, especially when the cost of goods and services increases. He remarked that as the demand decreases, it will have a negative impact on the country’s financial performance. The break-even point will become a crucial factor. Therefore, it is of utmost importance for businesses to guarantee they reach the break-even point during this period.
Citizens constantly adjust their long-term plans & short-term objectives.
He further emphasized that this is an exceptionally challenging and critical time for Nigeria. According to Mr. Meshioye, the constantly changing nature of the currency market has made it challenging for manufacturers to develop strategies that can be sustained over a long period of time. It’s a tumultuous period, necessitating a re-evaluation of the country’s approach. Crafting a comprehensive, forward-thinking strategy proves to be an arduous undertaking, and citizens find themselves constantly readjusting not only their long-term plans but also their short-term objectives to align with the ever-changing economic landscape, he declared.
In the African region last year, the Naira experienced a drastic depreciation, making it the most underperforming currency of 2023. A staggering 55% loss in its value was observed, directly attributed to the strategic choice by Bola Tinubu, the president of the nation’s newly appointed administration, to introduce a floating currency system. In the year 2023, during the month of June, an important declaration was made by the Central Bank of Nigeria (CBN). This declaration entailed the removal of the rate limit on the country’s currency, specifically within the domain of the Investor’s and Exporters’ (I&E) foreign exchange market.
Nigerian Naira plummeted by 55% against the US dollar.
Also, in December 2023, Nigeria saw a considerable rise in its yearly inflation rate, reaching a record-breaking 28.92% as reported by the National Bureau of Statistics (NBS). This surge occurred after November’s already high rate of 28.20%, signifying a notable increase. In the year 2023, Nigeria and Kenya, similar to all other nations worldwide, experienced their fair share of triumphs and tribulations. Although both countries witnessed notable advancements across various sectors, they weren’t immune to certain socio-economic setbacks.
Furthermore, the entire continent of Africa encountered a multitude of obstacles, and one of the significant hurdles was the devaluation of their respective currencies. Nigeria, in particular, endured a harsh blow as the Naira plummeted by an alarming 55% against the US dollar, marking it as the nation’s most challenging year since 1999. In the realm of financial turbulence, the Kenyan Shilling was struck by an unparalleled descent, marking an indelible point in its 30-year history. The catalysts behind this downward spiral were identified as the surging interest rates and a notable plummet in foreign exchange inflows.
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Policy changes and the elimination of fuel subsidies are among the several factors that often lead to currency troubles. However, the problems faced by African countries grappling with underperforming currencies extend far beyond mere economic instability. The repercussions of feeble currencies become apparent as these nations navigate the complexities of global finance, impacting numerous facets of their societies and hindering prospects for long-lasting development. Despite a few African countries successfully preserving the stability of their currencies, others encountered significant challenges in doing so.