The pandemic has been tough on Nigerians, but how much of this is caused by the coronavirus compared to the naira scarcity?
Nigeria is one of the most populous countries in Africa and has been struggling with factors such as poverty, unemployment, and inflation for years. In 2020, the pandemic has worsened these issues and caused the economy to further decline. All this has had a major impact on the people of Nigeria.
The impact of the naira scarcity is even more significant than that of the pandemic. The naira scarcity has led to an economic crisis with higher inflation rates, which in turn has hampered economic growth and increased poverty levels. This means that more Nigerians have been plunged into poverty in 2020 due to naira scarcity than coronavirus related issues.
In this blog post, we will discuss how much of an impact both coronavirus and naira scarcity have had on poverty rates in Nigeria and what can be done to help Nigerians affected by these issues.
Why the Naira’s Scarcity Has Had a More Profound Impact Than Coronavirus
The Naira’s scarcity has had a more profound impact on poverty in Nigeria than the coronavirus pandemic, mainly because it is a long-term issue that has not shown signs of abating.
Part of the problem is the nation’s dwindling foreign exchange reserves, which have been declining since 2018 and were estimated to be about US$35.4 billion in February 2021. This limited access to foreign currency severely affects the availability and affordability of imports, resulting in skyrocketing prices and an increase in poverty.
The cost of living across the country has also been impacted by currency restrictions enforced by the Central Bank, which prevents anyone other than official importers to buy dollars and other foreign currencies for their use. This has caused prices of essential goods to skyrocket due to a shortage of products—meaning that even households with some money are unable to purchase essential items due to their inflated prices.
Ultimately, worsening economic conditions caused by Naira scarcity have led to an increase in poverty levels across Nigeria—a much more devastating outcome than any caused by the coronavirus pandemic.
Challenges of Inaccessibility to US Dollars
Accessibility to US Dollars has become challenging for many Nigerians due to naira scarcity. The naira scarcity stems from the Central Bank of Nigeria’s (CBN) inability to supply the currency needs of any market participant and its inability to defend the naira currency against widespread speculation. As a result, the country has been forced to rely on external sources of capital inflows and foreign exchange.
This lack of access to US Dollars has resulted in an increase in prices for imported goods, as well as an increase in unemployment rates. The high cost of living and lack of employment opportunities have led to increased poverty among Nigerians, making it difficult for citizens to make ends meet. Furthermore, due to the instability of the currency, many investors are withdrawing their investments from Nigeria, leading to further economic decline.
All this shows that naira scarcity has had a much more profound impact on Nigerians than coronavirus. It is essential that the CBN takes steps towards increasing its supply of US Dollars so that Nigerians can regain access to foreign exchange and be able accelerate their economic recovery during this difficult time.
The Effect on Small Businesses and Entrepreneurs
The economic downturn caused by naira scarcity has undeniably had a profound effect on Nigeria’s small businesses and entrepreneurs. The sudden drop in currency value has resulted in increased prices for goods and services, which may not be able to be absorbed by small business owners. These added expenses can quickly deplete the budget of an entrepreneur or small business owner, leaving them with less operating capital – or even pushing them into insolvency.
Moreover, the devaluation of the Naira has made it increasingly difficult for small businesses to acquire loans from banks and other lending institutions, as loan requirements are higher than ever before. This can lead to an inability to purchase needed supplies, pay staff members, or even to keep the doors open.
Ultimately, the effects of naira scarcity will continue to be felt throughout Nigeria’s economy – particularly among its small business owners and entrepreneurs who are most vulnerable to these destabilizing economic forces.
How Rising Inflation and Cost of Living Are Crushing Nigerians
As the Nigerian naira continues to struggle against inflation, the cost of living for everyday citizens has been escalating at an alarming rate. This has forced many into poverty by creating impossibly high prices of basic necessities. These include food prices which have more than doubled in some parts of the country, as well as transportation and accommodation costs which are increasingly unaffordable.
Additionally, businesses are also incurring extra costs due to the decline of the naira. This includes fuel costs, which rose by 25% in 2020, as well as import duties, taxes and tariffs that have pushed some businesses into bankruptcy.
This financial strain has further led to an increase in unemployment as companies have had to close their doors due to an inability to keep up with these rising costs. With more people out of work and wages not increasing at a similar rate to inflation, more Nigerians are finding themselves struggling just to stay afloat financially.
Possible Solutions – Reforming the Naira and Redesign
Reforming the Nigerian naira and redesign of its monetary system are possible solutions for tackling poverty in the country. There are several changes that could be made to reform the naira and make it a more stable currency.
Removal of the Decimal
The decimal should be removed from the naira, thus making it easier to calculate prices. This will also eliminate the confusion over pricing issues often caused by decimal points and make the currency easier to use.
Increase in Cash Inflow
The central bank should introduce policies that can increase cash inflow into Nigeria, such as investing in infrastructure projects or encouraging foreign investors to invest in the country’s economy. This increase in cash flow will boost economic activity and create more job opportunities for Nigerians, thus reducing poverty levels.
Floating Exchange Rate
To ensure that there is an adequate supply of the naira and reduce inflation, floating exchange rates should be implemented so that it does not become overvalued or undervalued against other currencies. This will help stabilize prices of commodities and services, which in turn will improve economic conditions for many Nigerians living in poverty.
What Nigerians Can Do to Combat Poverty and Reduce Dependency on Currency Exchange
The Nigerian economy has been long struggling, but the added pressures of coronavirus and naira scarcity have caused a significant increase in poverty. Fortunately, there are some steps that good citizens of Nigeria can take to combat poverty and reduce their dependency on currency exchange.
With proper financial planning, individuals and families can begin to save money instead of just spending it all on basic needs. This allows for the savings to be put towards investments or used as emergency funds when faced with an unexpected financial setback.
Start a Side Hustle
For those who have lost their job due to the pandemic, starting a side hustle is one way to supplement your income. There are numerous opportunities available, including freelance writing, virtual assistant work, or even becoming an Uber driver. Utilizing these platforms will not only help bring in extra cash but also develop marketable skills for future employment opportunities.
Become Financially Literate
It is important for Nigerians to become financially literate in order to make smart decisions about money management. Reading books and online articles about personal finance can help people better understand how to handle their finances and invest wisely for the future. With this knowledge, individuals will be able to make sound investment decisions when it comes to their own financial situation.
Overall, the Nigerian economy has been in decline for some time, and the devastating effects of the pandemic, combined with the lack of government action in currency stabilization, have exacerbated the issue. While the virus has had an undeniable impact on the country, it is the lack of resources and inability to launch sustainable financial reforms that has pushed many Nigerians into poverty. If a meaningful solution is to be found, it must involve a comprehensive approach to the issue of Naira redesign and fiscal stability on all levels. Ultimately, it is up to the government to step in and craft a strategy that will ensure that everyone, especially those most vulnerable, is able to make ends meet.
GIPHY App Key not set. Please check settings