Naira Plummets Amid 100% Surge in Staple Food Prices

Nigeria's naira reaches N1500 to buy and N1515 to sell at the Lagos Parallel Market, amidst soaring food prices. The Central Bank of Nigeria's interventions have failed to stem the currency's decline, with the naira now rated as the world's worst-performing currency.

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Nitish Verma
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Naira Plummets Amid 100% Surge in Staple Food Prices

Naira Plummets Amid 100% Surge in Staple Food Prices

On Monday, May 13, 2024, the Dollar to Naira exchange rate at the Lagos Parallel Market (Black Market) reached a staggering N1500 to buy and N1515 to sell, as the Nigerian currency continues its steep decline. This development comes amidst a backdrop of soaring food prices, with staple items like rice, garri, yam, and beans seeing a 100% annual increase, according to a report by the National Bureau of Statistics (NBS).

Why this matters: The rapid depreciation of the naira and skyrocketing food prices have severe implications for the standard of living of Nigerian citizens, particularly the most vulnerable populations. If left unchecked, this economic crisis could lead to widespread poverty, social unrest, and political instability in the region.

The naira's freefall has persisted despite interventions by the Central Bank of Nigeria (CBN), which has implemented various reforms and supplied dollars to Bureau De Change (BDC) operators in an effort to stabilize the currency. However, these measures have failed to stem the tide, with the naira now rated as the world's worst-performing currency over the last month, according to a Bloomberg report.

A Bureau De Change operator shed light on the situation, stating, "We have seen more demand in recent times, and this is what is causing the increase. I can tell you also that there is no enough dollar supply, and this is why the rate is increasing." Aminu Gwadabe, President of the Association of Bureau De Change Operators of Nigeria (ABCON), pointed to deeper issues, noting, "The real issue is still the question of liquidity. The dollar is not available; and there is dollarisation of the financial system. People are really worried about the inflation rate that is hitting deep into the value of the naira."

The impact of the naira's depreciation is being felt acutely by Nigerian households, as food prices continue to skyrocket. The NBS report revealed that the average price of 1kg of loosely sold local rice rose by 152.93% year-on-year, from ₦530.08 in March 2023 to ₦1,340.74 in March 2024. Similarly, the price of 1kg of white garri surged by 112.34% year-on-year, from ₦353.16 in March 2023 to ₦749.89 in March 2024.

Economists and experts have weighed in on the crisis, with Dr Muda Yusuf, CEO of Centre for the Promotion of Private Enterprise, emphasizing the fundamental issue of supply and demand. "It is more of a supply issue. Also related to that is a confidence issue because if we are not able to supply consistently, it will affect confidence, and once confidence begins to weaken, speculative demand will kick in, and that will begin to pile pressure on the system," he explained. Dr Oluseye Ajuwon, an economist, echoed these sentiments, stating, "It is purely a supply and demand issue. Once demand is more than supply, the price will continue to depreciate. The Central Bank should start doing what it needs to do by tracing money to know where it is coming from and where it is going."

As the naira continues to plummet and food prices soar, the Nigerian economy faces a precarious situation. The CBN sold dollars at a discounted rate of N1,021 per dollar on April 23, 2024, and has taken action to stop speculation with raids on unregistered BDC operators. However, the crisis persists, leaving many Nigerians grappling with the harsh realities of a rapidly depreciating currency and skyrocketing costs of living. The road ahead remains uncertain, as policymakers and financial authorities seek to navigate this complex economic landscape and restore stability to the naira and the nation's food markets.

Key Takeaways

  • Naira plummets to N1500 to buy and N1515 to sell at Lagos Parallel Market.
  • Food prices surge 100% annually, with rice and garri prices doubling.
  • Naira rated as world's worst-performing currency over the last month.
  • Liquidity crisis and dollarization of financial system contribute to naira's decline.
  • Economists blame supply and demand issues, lack of confidence, and speculative demand.