Nigeria Business

Nairas 39 Plunge Threatens Job Cuts In Manufacturing Sector1

Naira’s 39% Plunge Threatens Job Cuts in Manufacturing Sector

The Nigerian naira has experienced a significant depreciation of 38.9% against the US dollar in the official Investors and Exporters (I&E) window of the Central Bank of Nigeria over the past three months, as reported by The PUNCH. Data from the FMDQ Securities Exchange indicates a drop from N745.19/$ on October 3, 2023, to N1035.12/$ as of January 3, 2024. This decline follows the Central Bank of Nigeria’s exchange rate unification policy announced in June 2023, which saw the naira fall from 471/dollar to over 1000/dollar.

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The naira has recently traded around N1,220 per dollar in the parallel market. This depreciation severely impacts manufacturers’ bottom lines and other members of the organised private sector. The Manufacturers Association of Nigeria, the Lagos Chamber of Commerce and Industry, and the Nigerian Association of Small-Scale Industrialists have expressed concerns about scaling down operations, potentially leading to more worker layoffs.

Despite government efforts to improve FX market liquidity, including clearing FX backlogs and securing foreign exchange support facilities, the naira’s value continues to decline. The World Bank has highlighted the low volume of FX trades in the official window and stressed the need for stabilisation at market-reflective rates to attract foreign direct investment.

The private sector initially welcomed the Central Bank of Nigeria’s decision to float the naira, removing the rate cap. However, the continued depreciation has raised alarms about the potential shutdown of companies and relocation of businesses due to forex scarcity. The Manufacturers Association of Nigeria and other industry leaders are calling for urgent government action to address the crisis and prevent further economic damage.

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Editorial:

The recent plunge of the Nigerian naira by nearly 39% against the US dollar poses a grave threat to the nation’s manufacturing sector, potentially leading to significant job losses. This situation is a stark reminder of the fragility of emerging economies in the face of global financial fluctuations and the critical importance of sound economic policies.

We believe that the government’s efforts to stabilise the currency and improve liquidity in the foreign exchange market, while commendable, need to be more effective and responsive to the realities of the market. The current scenario underscores the urgency for a comprehensive economic strategy that addresses immediate currency volatility and lays the groundwork for long-term economic stability and growth.

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The plight of manufacturers and small-scale industrialists considering downsizing or shutting down operations is a warning sign of the country’s broader economic challenges. It highlights the need for a more robust and diversified economy less dependent on volatile external factors.

As we navigate these turbulent economic waters, policymakers must engage with industry leaders, economists, and international partners to devise and implement strategies that will safeguard the livelihoods of millions of Nigerians and ensure the sustainability of the nation’s economic development.

Did You Know?

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  1. The Nigerian naira was introduced on January 1 1973, replacing the pound at a rate of 2 naira = 1 pound.
  2. Nigeria operaJanuary 1tiple exchange rate regime, a subject of debate and economic analysis.
  3. The Central Bank of Nigeria is the sole issuer of legal tender money throughout the Nigerian Federation.
  4. Nigeria’s economy relies heavily on oil, which accounts for most of its export earnings and government revenue.
  5. The Nigerian manufacturing sector includes diverse industries ranging from food and beverages to textiles, pharmaceuticals, and automobiles, contributing significantly to the nation’s GDP.

Author

  • Kelechi Abel

    Kelechi Abel is a dynamic and insightful writer with a diverse professional background. He has worked in various roles, including as an English Teacher at Yahweh Care Foundation Nursery & Primary School and in customer relations and banking with City Gate Global Investment, Union Bank Nigeria Plc, UBA Plc, and Unity Bank Plc. Kelechi holds an Advanced Diploma in International Marketing and a BSc in Psychology from the University of Ibadan and Yaba College of Technology. His unique experiences in education and finance, coupled with his academic background, provide him with a broad perspective on various topics. A native of Ebonyi State, Kelechi enjoys reading, travelling, and driving in his leisure time, enriching his writing with diverse experiences and insights.

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