TEN MAIN REASONS FOR THE FALL OF NAIRA AGAINST THE DOLLAR THIS YEAR

 The Nigerian Naira has been facing a steady decline against the US dollar this year, with the currency reaching an all-time low of 550 naira to one dollar in the parallel market. This fall has caused serious concerns among the citizens and the government, as it has not only affected the country's economy but also the daily lives of its people. Let's delve into the ten main reasons for the fall of Naira against the dollar this year.

1. COVID-19 Pandemic

The outbreak of the COVID-19 pandemic has had a severe impact on the global economy, including Nigeria. The pandemic has led to a significant decline in oil prices, which is the main source of foreign exchange for the country. As a result, the country's revenue has decreased, leading to a shortage of dollars in the market and a fall in the value of the Naira.

2. Low Foreign Reserves

Nigeria's foreign reserves have been consistently declining, reaching a five-year low of $35 billion in March 2021. This low level of reserves has made it difficult for the Central Bank of Nigeria (CBN) to intervene in the market and stabilize the Naira's value.

3. Dependence on Oil Exports

Nigeria heavily relies on oil exports, which accounts for over 90% of its export earnings. With the decline in oil prices and the demand for oil, the country's revenue has been significantly affected. This has resulted in a shortage of foreign exchange, leading to the fall of the Naira against the dollar.

4. High Inflation Rate

Nigeria has been battling high inflation rates, which reached a four-year high of 18.17% in March 2021. The high inflation rate has eroded the value of the Naira and made it less attractive to foreign investors, leading to a decrease in the country's foreign exchange reserves.

5. Trade Imbalance

The trade balance between Nigeria and its major trading partners has been heavily skewed in favor of imports. This means that the country is spending more on imports than it is earning from exports. This trade imbalance has put pressure on the Naira and contributed to its fall against the dollar.

6. Foreign Exchange Controls

The CBN has been implementing strict foreign exchange controls, limiting the availability of dollars in the market. This has resulted in a shortage of dollars and an increase in the demand for the currency, leading to its fall against the dollar.

7. Political Uncertainty

Political instability and uncertainty in the country have also played a role in the fall of the Naira. Investors are hesitant to invest in a country with a volatile political climate, leading to a decrease in foreign investments and a shortage of dollars in the market.

8. Corruption and Mismanagement

Corruption and mismanagement of the country's resources have also contributed to the fall of the Naira. The diversion of funds and misallocation of resources has led to a decrease in the country's revenue, making it difficult for the government to support the Naira's value.

9. Rising Debt

Nigeria's debt levels have been steadily increasing, reaching over $86 billion in 2020. The high debt burden has put pressure on the country's finances, making it challenging for the government to support the Naira's value.

10. Weak Economic Policies

The government's weak economic policies have also had a negative impact on the Naira's value. The lack of clear and effective policies to address the country's economic challenges has resulted in a decrease in investor confidence and a fall in the value of the currency.

In conclusion, the fall of the Naira against the dollar this year can be attributed to a combination of factors, including the COVID-19 pandemic, low foreign reserves, dependence on oil exports, high inflation rate, trade imbalances, foreign exchange controls, political instability, corruption and mismanagement, rising debt, and weak economic policies. The Nigerian government needs to take urgent and effective measures to address these issues and stabilize the Naira's value to ensure a strong and sustainable economy.