The biggest economic concern in town currently is the fall of the Nigerian Naira. Many Nigerians are crying that the Naira which used to exchange at N155 to the dollar at the official market now exchanges for N199 to the dollar. In the black market, the exchange rate is as high as N220 and financial analysts are forecasting that the Naira in the official market may drop to a low of N220 and lower in the black market.
So is this bad or good news for you? The answer to this question largely depends on which side of the Nigerian economy you play in. Let us first of all look at those who are likely be negatively impacted by the fall of the naira.
If you import any item into the country, your cost of importation has gone up. What used to cost N155 to import will now cost a minimum of N198 to bring in. This automatically raises your cost of production. So, for example, if you were going to buy a computer worth $400, instead of paying about N62,000 based an exchange rate of N155, you will now pay N79,000 based on the exchange rate of N198 to the dollar. Already, importers of second cars are complaining as the new exchange rate will result in significant increase in second hand car prices, which is what most middle income Nigerians can afford.
Users of foreign services
Do you a use any foreign service? Many Nigerian youths are now active consumers of online goods especially downloadable applications, music and entertainment. The prices of these items in Nigerian Naira will now go up. For example, those hosting their websites abroad will now have to pay more.
Nigerians schooling abroad
Nigerians schooling abroad will be most hit by the new exchange rate of the Naira. For example, school fees in UK schools, which costs an average of 13, 000 pounds and about N3.7 million based on the former average exchange rate to N285 to the pound, will now cost an average of N4.1 million per annum based on the new exchange rates of about N300 to the Pound. This represents a nominal increase of N400, 000 per annum.
Forget your summer holiday plans or start saving more money. Flight tickets are expected to rise through the roof because of the weaker Naira. $1000 return ticket to say UK or US will now cost $198,000 instead of N155, 000. Traveling plans this year may have to be shelved for many families that usually travel for summer holidays.
Nigerians who export goods from the country to foreign lands will now be smiling with the rapid fall in the naira. For them, the fall in the Naira is great news because they are going to make more money in Naira. Exporters actually benefit in two ways. Their goods become cheaper in the international market, which makes the goods more competitive and they also earn more naira when the dollar or pound they earn is converted to Naira. For example, an exporter of cocoa beans who used to sell $3000 per tonne, which translated into about N465, 000 will now earn N594, 000 for the same tonne of cocoa exported. So, the fall in Naira is actually good news for all exporters with little or no imported input into what they export.
Providers of services to foreigners
Lawyers, accountants, journalists and many Nigerians who provide services to foreign companies and foreigners and get paid in dollars will also be smiling over the fall in the Naira. For them, every dollar or pound they earn, will now translate into more Naira.
Manufacturers of made in Nigeria goods
With the fall in the Naira, Made-in-Nigeria goods will become cheaper and imported goods will become more expensive. This will mean Made-in-Nigeria goods will now become more competitive as more Nigerians will now patronize them because they are cheaper. This means that the popular made in Nigeria goods from places like Aba will be able to sell more of their goods now that the Naira has fallen. This opens up opportunities for Nigerian entrepreneurs who will now be able to compete with imported goods from places like China, US, and Europe.
The Federal Government and state government will also be happy over the fall in the Naira as it translates to more money in their pocket. It is known that about of 70% of government finances comes from crude oil sale. But with the fall in crude oil prices in the international market, government revenues have dropped in dollars. So, where the government may have gotten $30 billion from crude oil sales, they may be getting about $25 billion. However the government spends in naira. So, why $25 billion will translate to N3.9 trillion at the old exchange rate of N155 to the dollar, at N198, the same amount of revenues translates to N4.95 trillion, almost a trillion in more revenue that will go to both the state and federal government based on the new exchange rate. So, for both the state and federal government, the naira devaluation is not strictly bad news.