DE-DOLLARIZATION OF THE NIGERIAN ECONOMY
From my perspective, it refers to reducing the influence the United States dollars have on the Nigerian economy. Our government should ultimately ban, diminish or lower our dependency on the use of the US dollars in our Economy.
The pain Nigerians are going through with the dollarization of the Nigerian Economy is enormous and unbearable. Everything in Nigeria is attached to the US dollar. Market rates of essential and non-essential items are tied to the black-market rates of the US dollars.
As of today, the 16th of February 2024 the exchange rate is over the 2010 bar of a Naira to a British pound’s sterling and about 1550.00 to US dollars. This is outrageous!
Prices of essential commodities have quadrupled in months because they are linked to the US dollar black market rates. People can no longer afford essential commodities. There are demonstrations, carrying placards and complaining of hunger in the land.
How did we get to this? We want our government to push for measures and ideas on how to make Nigeria work and advance positively in governance and our Economy.
In one of his speeches, the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun spoke of palliatives in a country in abundance because of long-term mismanagement, financial recklessness, corrupt practices, poor economic policies and lack of foresight have brought us to this point. How many people have Nigerian economic palliatives reached or helped? All we want is for our Economy to be revived.
The US dollar is still widely used in international transactions and as the world reserve currency.
Our federal government and our Legislatures should enact laws to significantly reduce the use of dollars in our Economy. This will ultimately and significantly decrease the use of dollars in our Economy by our national institutions, individuals and corporations.
Our local currency, the Naira should be enforced as the only legal tender in Nigeria. Anything less than that should be seen as going against the law of the land.
Another worrying trend is that US dollars are now widely accepted by Nigerians in doing local transactions, (paying school and University fees, paying some salaries, landlords in some states in Nigeria eg Lagos, etc are asking for rents in dollars, purchasing goods and services like plane tickets, during the last political election, some political parties allegedly being bribed in dollars, etc).
This sort of thing made our Naira vulnerable and gave birth to a currency crisis. It should be discouraged and not accepted in our economy. All US dollars sent to Nigeria should be exchanged into our local currency, the naira. To improve the value of the Naira.
The provisions of the CBN Act of 2007, state that “ the currency notes issued by the Central bank shall be legal tender in Nigeria ... for the payment of any amount”, so why is this not enforced in the country?
The hegemony of the US dollar is due to the long-standing global network of alliances and partnerships.
The history of the use of US dollars as a worldwide currency dates back to the 1944 Bretton Wood Conference and its new post-war International monetary system agreement.
The US dollar became the world’s primary reserve currency for international trade and the only post-war currency linked to gold at $35.00 per troy ounce.
The US treasury exercises oversight over the SWIFT (Society for Worldwide Interbank Financial Telecommunication) financial transfer network. In 1971, President Nixon terminated the dollar for gold convertibility.
By issuing government debts to other nations the US historically propped up the US dollars. This helped to finance its budget deficits.
The US introduced sanctions all over the world including in Venezuela, Iran, North Korea, Syria, Myanmar, etc and most recently in Russia at the beginning of Russia Russian-Ukrainian war.
One-quarter of the global population is suffering from the direct impact of US-led economic sanctions which diminished the world’s ability to trade in goods, commodities and services.
De-dollarization is now a world trend. The sanctions brought about a shift in geo-politics and geostrategic alliances and partnerships which resulted in this trend.
Countries are now seeking alternatives to the US dollar reserve which is Gold. Since 1950, the gold reserve has risen to 152%. A survey by the World Gold Council finds that 80% of the 57 Central banks it surveyed expect to expand their gold reserve.
India, China, Russia, Iran, Saudi Arabia, the BRICS nations and other emerging economies have been challenging and shifting the established world orders. Due to the US sanctions imposed on the so-called unfriendly nations, these countries have been diversifying their reserves and protecting themselves from external shocks and reducing their exposure to currency volatility. This has helped leverage its economic growth and increased its trade relationship with many countries.
Nigeria should try to join and cooperate with the BRICS nations. This will help us in the shifting of the global economic landscape and help our export competitiveness.
The Russian-Ukrainian war made the United States and the Western world impound the Russian monetary assets with its reserve foreign exchange which is over 400 billion dollars. The USA used the dollars to leverage thinking it would hurt the Russian economy. This sent negative reactions and signals to other countries that held reserves in US dollars. The weaponizing of the US dollar brought the hegemony of the US into question. Many countries reconsidered their stance concerning holding the US dollars in their reserves and shifted to gold or other currencies.
Russia and China started using the Renminbi for purchasing and paying for commodities while China and Saudi Arabia agreed to use the Yuan to pay for the purchase of oil.
The BRICS nations are also planning to launch their own currency and boycott the US dollar due to US policies and uncertainties.
We can also reduce the stock of our dollars by looking towards the Chinese Yuan as a trading currency.
On March 30, 2023, the Deputy Chairman of the Russian State Duma, Alexander Babakov on the sidelines of the Russian Indian business forum in New Delhi stated that “the BRICS countries can create a new currency that will be backed not by Gold but by real resources including land, and rare earth metals.
This statement by Mr. Alexander Babakov is worth paying attention to.
- The Moscow Stock Exchange has also started trading in Bonds denominated in the Chinese Yuan to attract Asian investors to further diversify away from the US dollar. This opened an additional source of forex liquidity.
- In Egypt in May 2022, Cairo started issuing Yuan-denominated debt to raise funding in the Chinese bond market.
Multipolarity has made a lot of countries seek the breakdown of American hegemony.
We should also investigate the Japanese Yuan bonds as an alternative to depending on the US dollar.
Though Nigerian trade volume with Japan has reached 10 billion dollars which is growing, we need to do more.
According to the Japanese ambassador to Nigeria Matsunaga Kazuyoshi, Mitsubishi and others will assemble with other manufacturers to operate in Nigeria to conserve foreign exchange.
These are some of the policies the Nigerian government needs to investigate to help with our domestic economy.
How do we lessen the influence of the US dollar in our local markets? Nigeria should encourage their businesses to utilize their local currencies in all local trades.
Reversing the use of the US dollar in our economy is a very challenging process for Nigeria.
This Challenge includes solving the following problems:
- Huge fiscal deficits
- low foreign investment inflows
- Economic mismanagement and poor monetary policy
- We must build fiscal surpluses and lower public debt and external debt. We should concentrate on production
- We cannot have an import-based economy and want to de-dollarize
- Reduce the over-reliance on the dollar and restore the pride of our currency
- Decrease our over-dependency on foreign currency i.e. the dollars
- Solve the problem associated with an influx of imports into the Nigerian Economy
The Nigerian government should liaise with security agencies to deal with currency speculators and economic saboteurs which are one of the major economic problems of our nation.
We need to integrate both fiscal and monetary policies with a strong regulatory intervention that will involve judicial sanctions on our Economic saboteurs who embezzled and misappropriated our money.
We cannot depend on only the policy of the Central bank to regulate and protect our Naira and the economy.
Until Nigeria values its own currency, the Naira, and puts a stop to the use of US dollars as a legal tender in our Economy, our Naira will not appreciate, with many economic ramifications.
Something drastic must be done to bring down the exchange rate of the naira to the US dollar, otherwise, we will not tackle the problem of hyperinflation in the economy.
Economic and social chaos will not be a thing of the past in Nigeria unless we take measures to stabilize the Naira as a currency that is worth value.
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DE-DOLLARIZATION OF THE NIGERIAN ECONOMY
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