What happened to Naira in the previous week and why you should care

What happened to Naira in the previous week?

Following the presidential decision to suspend the CBN president, the Central Bank of Nigeria under the approval of recently inaugurated president Bola Tinubu officially authorized the floating of the local currency. This recent development has caused quite a stare in the country as many people are still perplexed as to whether this is a good thing or not, especially following the recent devaluation of the naira against the dollar. While some Nigerians share fair knowledge of what the floating of the naira means and how it affects them, there are still many people that have not fully grasped the meaning of this concept. In this article, we’ll be answering all the questions you probably have concerning the floating of naira in the simplest way possible. 

What does “floating Naira” mean?

The floating of the naira simply means that Nigeria (CBN) will no longer hold full and fixed control over the exchange rate. The value of the naira will now be determined by market forces according to the demand and supply in the foreign exchange market. Many Nigerians have communicated their desire to understand what the naira was doing before it “started floating”. Before the floating of the naira, CBN fully controlled the price of the naira in the foreign exchange market. The rate at which the naira is exchanged for any foreign currency, however, will now be based on the agreed-upon price established between the buyer and seller. Additionally, there would be no CBN meddling in the form of rules or policies. 

So the naira is now like a regular commodity in your local market where you can bargain with the seller and get them to sell for a price that works for both of you. Before the floating policy, naira was like a commodity in a supermarket that comes with a fixed price that leaves no room for bargaining. 

Is the floating of the naira a good or bad thing?

Deciding whether the floating of the naira is a good or bad thing is still quite tricky as it seems more like a question whose answer can only be determined by time. The state of a floating economy is constantly changing according to the concept of demand and supply. This means that the naira will have its good times and some not-so-great times. 

Experts have predicted that this new development will most likely attract more foreign investors and in turn improve the economy of the country. This would possibly lead to infrastructural development higher employment and a generally improved quality of life for the average Nigerian. Having said that, the floating of a local currency can have both benefits and drawbacks, and how it affects things relies on a range of variables, including the state of the economy, governmental priorities, and market conditions.

As some Nigerians might recall, the naira was floated in 2016 too but that didn’t exactly go well. However, the readiness of the government in 2023 has given experts reasons to believe that the economy might get more favourable results now. 

How does this affect me as an average Nigerian?

Before the official floating of the naira, the prices of many things in Nigeria had already experienced a major surge. This surge would possibly last longer and might even increase over the next few months. However, imported goods and services might increase a different kind of spark in prices as they were priced at the fixed market rate of N471 before now. 

The recent japa wave might also reduce in the coming months as converting the naira to pay for international fees will not be favourable for now. Even visa and IELTS costs will be more expensive now. 

However, Nigerians who earn in dollars or have a savings reserve in dollars will benefit greatly from this new policy. 

Is this a good time to invest in dollars? 

A few months ago was the perfect time to invest in dollars. However, it still isn’t a bad idea because as we have stated earlier, a floating currency is constantly changing. Sometimes, that change will be favourable and sometimes, it won’t be. The good thing is you can choose to convert or sell your dollars anytime through the appropriate authorities. But if you’re asking if this is a good time to earn in dollars, the answer is a “yes” with no hint of doubt. 

Conclusion

It’s okay to have questions and worries as a Nigerian concerning the floating of the local currency. There are many theories making rounds on social media regarding the floating of the naira as many of us are still trying to figure out what this means for us.  However, we must all remember to be patient, though as the answers we seek will finally become clear to us in the upcoming months.