By Iwuoma Chizurum Eberechi
In early 2023, Nigerians faced a substantial economic setback with the scarcity of the national currency (Naira notes), causing challenges for businesses and individuals seeking adequate funds.
Recent reports from states such as Lagos, Kano, and Kwara now highlight a resurgence of this scarcity.
As per a Central Bank of Nigeria (CBN) report, the currency in circulation rose by 3.75% to N2.76 trillion in September 2023. However, despite this increase, a significant drawback of the CBN’s naira redesign policy has started to emerge in the form of cash scarcity.
Causes of the Scarcity
Earlier assurances from the Federal Government and the CBN promised ample cash supply in December, yet reports indicate sparse conditions in banking halls and ATM galleries due to restrictions on withdrawal amounts.
The scarcity can be attributed to a couple of prominent reasons. Firstly, there exists an imbalance between the demand for and supply of foreign exchange.
Nigeria heavily relies on imports, encompassing both consumer products and raw materials for its industries.
The decline in oil prices, a substantial portion of Nigeria’s export revenue, has resulted in reduced foreign exchange inflow.
This shortage of foreign currency has made it challenging for individuals and businesses to access the necessary funds required for importing goods, consequently contributing to the depreciation of the Naira’s value.
Another significant factor is corruption. Illicit movement of funds and capital flight are sapping the vitality of the Nigerian economy, undermining investor confidence and impeding efforts to attract and retain foreign direct investment (FDI).
This creates a detrimental cycle, further depleting the available Naira.
Addressing the Naira Scarcity Challenge
Resolving the Naira scarcity issue necessitates a comprehensive strategy encompassing various solutions. In the short term, collaboration between the government and the CBN is vital to effectively manage foreign exchange reserves.
This involves implementing measures to curb capital flight, diversify the economy, and boost investor confidence.
Furthermore, the government must prioritize infrastructure development and create a conducive environment for business growth.
Investments in sectors like agriculture, manufacturing, and technology can reduce dependence on imports, providing a long-term boost to the economy and alleviating Naira scarcity.
The escalating scarcity of the Naira in Nigeria presents a formidable economic challenge. While citizens have experienced the adverse effects earlier this year, a strategic and holistic approach can address this issue and mitigate its repercussions.
By focusing on economic diversification, reducing corruption, and enhancing investor confidence, Nigeria can chart a course toward a more sustainable and resilient economy, ensuring a brighter future for its people.