Nigeria has been facing significant challenges with its monetary policy in recent years. The country's economy has been struggling with inflation, currency devaluation, and a shortage of foreign exchange reserves.
These issues have had a significant impact on Nigerians' daily lives, making it harder for them to make ends meet. One of the primary causes of Nigeria's monetary issues is the country's overdependence on oil exports. Nigeria is Africa's largest oil exporter, and oil exports account for around 90% of the country's foreign exchange earnings.
However, the global oil market has been unstable in recent years, with fluctuations in oil prices leading to a decline in Nigeria's foreign exchange earnings. This, in turn, has put pressure on the Nigerian currency, the naira. The naira has been steadily losing value against major currencies like the US dollar, Euro, and British pound. In 2020, the Central Bank of Nigeria (CBN) devalued the naira twice, leading to a 24% depreciation in the currency's value against the US dollar.
This has led to rising inflation, with the cost of goods and services skyrocketing in Nigeria. For example, food inflation in Nigeria hit a four-year high of 20.6% in November 2020.
The CBN has implemented several policies to address Nigeria's monetary issues. One of the most notable is the restriction of access to foreign exchange. The CBN has limited the amount of foreign currency Nigerians can purchase, making it harder for businesses to import goods and services.
This has led to a shortage of essential goods, including fuel, which has resulted in long lines at gas stations and frequent power outages. Additionally, the CBN has introduced policies to encourage Nigerians to invest in agriculture and manufacturing.
The CBN's Anchor Borrowers' Programme (ABP) aims to provide affordable credit to farmers and small businesses in Nigeria. The ABP has been successful in increasing agricultural output in Nigeria, but it has not been enough to address the country's broader monetary issues. In conclusion, Nigeria's monetary issues have had a significant impact on the country's economy and people's daily lives. The country's overdependence on oil exports, currency devaluation, and a shortage of foreign exchange reserves are the primary causes of Nigeria's monetary challenges.
While the CBN has implemented several policies to address these issues, there is still a long way to go before Nigeria's monetary issues are fully resolved.