Nigeria’s currency freefall causes anger and despair among Nigerian pilgrims

By Ajayi Sodiq

It is all pain and more agony for Nigeria, especially the Muslim pilgrims, with the benefits of a market exchange rate still a long way off.

With the naira’s seemingly unending devaluation causing agony and despair for Nigerians at home and in their companies, the level of angst and sorrow around the continent’s most populous country is spiralling out of control.
Muslim preachers and other religious leaders claim that one of the causes of frustration in the northern part of the nation is the outrageous expense of making the journey to Makkah.

Every year, 95,000 Muslims from Nigeria often make the journey. Only sixteen thousand individuals have registered this year, according to figures from the Pilgrims Welfare Board. Given that each pilgrim costs more than N5.2 million, it is predicted that some of the registered pilgrims may withdraw due to their inability to handle the financial burden made worse by the devaluation of the naira.

When officials previously gave estimates for the cost of this year’s trip, the official market value of the naira was 833/$, and potential pilgrims were informed that the cost would exceed N5 million per person. It will cost well over N6 million for each pilgrim at the present rate of N1,400/$.

According to an imam in a masjid in Kaduna, the despair felt by Nigerians over the increase in the expense of pilgrimage evokes painful memories of the 1984 incident in which the then President had threatened to cancel the hajji on his first visit. “NO HAJJ IF” was the headline that the item appeared under in the New Nigerian newspaper at the time. The government was forced to backtrack as a result of the terrifying headline that echoed throughout the Muslim north.

The rising cost of food and medicine in Nigeria is causing dissatisfaction among those who are unaffected by the increasing costs associated with the Hajj. A 50kg bag of rice currently costs N65,000, whereas a bag of cement costs N6,000. Vulnerable Muslims are concerned about the high price of foodstuffs on the market as the holy month of fasting approaches. Due to exorbitant food prices, Nigerians are being forced to reduce their meal intake and look for less expensive options.

In addition, power distribution firms nationwide are reporting an increase in customer defaults in monthly rate payments as a result of the naira freefall.

With disposable income drastically declining, businesses—which were already negatively impacted by increased inventory—may have to close their stores and plants.

Nigeria’s inflation rate rose to its highest in more than 27 years in December as food prices surged, exacerbating a cost-of-living crisis and piling more pressure on the central bank to raise interest rates.

The naira’s sharp depreciation adds even more pressure on the Central Bank of Nigeria (CBN) ahead of the crucial Monetary Policy Committee (MPC) meeting in February.

Muda Yusuf, chief executive officer of the Centre for Promotion of Private Enterprise, stated “The central bank Governor, Mr Cardoso will however have to present himself before the Senate to address the committee on the currency free-fall. That comes after the former CEO of Citibank, who took over for the troubled Godwin Emefiele last year, was called to a meeting by the Senate Committee on Banking, Insurance, and Other Financial Institutions on February 6. The CBN cannot intervene in the spot FX market because of the demand backlog that it is still clearing,”

The naira slide will also affect the repayment of bank loans, particularly those taken by oil and gas firms.

The debts owed by oil and gas firms to Nigerian commercial banks jumped by over 40 per cent after the CBN freed the currency last June.

Their debts ballooned to N9.7 trillion in June from N6.79 trillion in the previous month, accounting for 25.88 per cent of the banks’ total credit, which grew to N37.48 trillion from N30.18 trillion, according to CBN data.

Firms operating in the downstream, natural gas and crude oil refining subsectors owed N7.03 trillion as of June as against N4.85 trillion in May, while those in the upstream and services subsectors owed N2.67 trillion, up from N1.94 trillion.

“The naira free-fall is leaving a bloodbath in its wake,” a senior executive at a leading multinational consulting firm said.

“We know the CBN is trying to achieve price discovery in the official market but there’s so much at stake if their efforts go wrong,” the person, who did not obtain permission to speak publicly, added.

The naira closed stronger at 1,455 per US dollar on Wednesday, compared to N1,482 per US dollar the previous day in official trading. The currency traded weaker on the streets at N1,500, according to data collated from multiple traders.

As the ripple effect of the naira free-fall wreaks havoc on the fragile economy, President Bola Tinubu is out of the country.

Some leaders of the President’s party are now even questioning his wisdom in being abroad at a time when his house appears on fire.

Tinubu, whose ministers have to wait for months to see him, has met with Daniel Bwala, ex-spokesperson for the presidential candidate of the PDP and former Vice-President Atiku Abubakar, twice in three weeks in France.

“Call it a sign of misplaced priorities,” a university lecturer said.

Source: Business Day Newspaper

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