General, Problem solving

Naira, Inflation and the Dollar

Faith Uyi Minister Written by Faith Uyi Minister · 1 min read >

Will one Nigerian dollar ever equal one American dollar again? What is the fate of the naira in another decade? Is running a country different from running a private company? Did Nigeria’s inflation problems start in the ’90s? what should be done to save the failing economy?
In 1981, 41 years ago, $1 was worth 53kobo. By the end of that year, it was about 65kobo. 41 years ago, 1 million naira was worth more than 1.5 million dollars. The naira 40 years ago was worth more than the Dubai currency.
Steadily we saw the increase as 1 million naira became 100,000 dollars in 1991. The naira had lowered in value by over 1,500%. 10 years later it dropped even lower by another 1,000%, 1 million naira was about $8,800. By 2011 a million naira had dropped lower to 6,300 dollars and in 2021 it became $2,500. What would it be by 2031?
Inflation is the decline of the purchasing power of a currency. This decline reflects on the average cost of goods, thus implying that the currency can only purchase less than it used to before. The Nigerian economy has suffered inflation since 1996, hitting an all-time high of 47.56% in January of the same year and -2.49% by January 2000. In August 2021 Nigeria’s inflation rate was 17%, increasing from 13.7% as of September 2020, growing at an average of 2.04% annually. However, by April 2022 it was 16.82% as against 15.92% the previous month.
This inflation has resulted in an increased price of goods sometimes by 98%, 100%, to as high as 250-300% for the same items bought at the same amount of dollars less than 3 years ago. To put it in more practical terms, bread bought at 250 naira in 2019 is now worth 650 naira as of May 2022.
What is the cause of this inflation? Can it ever be rectified? Is inflation healthy for the Nigerian economy? How healthy is this inflation for the naira? What makes a currency strong? What weakens a nation’s economy?
America is the world’s largest single importer importing over 2 trillion worth of goods in 2014 and 2.83 trillion in 2021. Although most items sold in the US like clothes and other commodities are made in China, the largest trading partner of America is Canada, trading almost 600 billion dollars worth of goods each year.
The United States is the second-largest exporter. Exporting intellectual goods like Facebook, Instagram, Hollywood and other forms of entertainment services, pharmaceuticals, high tech like jet turbines, generators, and aircraft. In international trade and the national economy, it does not make sense to make everything on your own when it can be bought from other countries at certain advantages.
This speaks directly to the value of international trade. However, if international trade is not managed properly it could lead to a trade surplus or worse, a trade deficit. Trade deficit or surplus is usually gotten from the net export. Net export is the annual difference between imports and export.


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