Why You Need To Pay Attention To The Nigerian Currency Crisis

Nigeria’s currency, the naira, has been getting slammed as the oil-exporting nation has been getting squeezed by tumbling crude prices.

However, it looks like the official price of the naira has stabilised against the dollar in the last couple of weeks after the central bank stepped in and restricted currency trading. Early December, the central bank also took 300 billion naira out of circulation in its effort to support the struggling currency.

Reuters reported last week that the street price of the currency is lower than the official price, and it could be close to a record low. At times during the week before Christmas, the rate was as much as 190 naira to the dollar. It seemed to be about 187 as of Monday

A separate Reuters report notes that the central bank’s foreign exchange reserves are at $US34.5 billion as of Monday — down almost 21% on the year.

This is a story to watch as Nigerian national elections approach in February. Experts are expecting it to be expensive (even more so as the price of oil continues to drop) and potentially bloody. In the backdrop is what more or less amounts to a war against Boko Haram in the north of the country. A currency crisis won’t be likely to help any of these things.

Why does any of this matter? Nigeria is (somewhat arguably) the largest economy in Africa. It’s been growing at a clip of about 7% for years. But on a per capita basis it’s still very poor, not to mention very young. According to the Economist it needs to sustain double-digit growth just to absorb the millions of people ageing into the labour force. That’s not going to happen if the country is in crisis. 

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