Decline and fall of the naira - Punch Newspapers

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Decline and fall of the naira - Punch Newspapers
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Money makes the world go round. The strength of a country – its prosperity and flourishing – is best measured by the standing of its currency. The American business magnate and politician, Ross Perot, observed that, “a weak currency is the sign of a weak economy, and a weak economy leads to a weak nation”.

Ever since the Bretton Woods settlement of 1944, the dollar has been the world’s reserve currency. The dollar exchanged at a fixed parity with gold at the rate of $35 to 1 ounce of gold, until 1971, when, due to balance of payments constraints, President Richard Nixon unilaterally revoked the gold-dollar exchange system. Ever since, the international monetary order has been governed by a system of floating currencies.

Nigeria is a monocultural import-dependent economy. Whilst oil no longer accounts for the bulk of budget revenues, it still accounts for more than 90% of our foreign earnings. When oil prices tumble, our naira goes into a tailspin; sending inflationary pressures throughout the economy. Thirdly, debt. Nigeria’s current debt stands at a staggering N33 trillion , amounting to 35% of GDP. This year alone, we are projected to spend more than 90% of government revenues on debt servicing. High debts will further weaken the naira.

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