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These are very pricey and like let's last say, it is all easy for us.
You might guess something of ten today, tomorrow you get it for two.
Just keep hoping it to be better one day.
As we were just hearing from these Nigerians, times have been difficult and the prime suspect seems to be the naira. Over the past few years, the naira has experienced multiple downsides, but most recently some upside too. What is still down though, is Nigerian's spending power. They are yet to reap the benefits of the naira's recent rebound. So how can you go from being a weak currency to the best in
the world and then losing ground again? And what does a stronger currency mean for the economy of one of Africa's biggest markets. This is what we are going to talk about this week with my colleague and Legos Bureau chief Anthony ose Brown. I'm Jennifer Sabasanja and this is the Next Africa Podcast, bringing you one story each week from the continent driving the future of global growth with the context only Bloomberg can provide. Thank you so much
for joining us. Anthony, you're very busy and it's an honor to have you step away from watching what is going on in Nigeria and mainly what is going on with the naira. It's been a whirlwind, roller coaster day after day for you and all of the team. Let's just rewind back though to May of twenty twenty three when Bulletin Abu, who's the current President of Nigeria came to power. Bolatinubu has one Nigeria's presidential election.
So victory that will placed him at the helm of Africa's biggest economy.
Can he fix the economy given his mandate? Should we start there when we're thinking about the naira and the roller coaster that has been the past year. What's your take?
I think that's a good point to start because before that point, the naira was pegged against the dollar. President to nob got inaugurated twenty nineth May and one of the first things he said during his inaugration was that the way the monitory policy has been managed before then wasn't right and he was going to make sure reforms are made. And within a week, the former Central Bank of Nova sat and someone was appointed in acting capacity and steps were immediately taken to remove the peg, the
nyira's peg against the dollar. And since then, as we said, it's been a roller coaster right for the currency.
And Anthony, maybe you can talk us through the first few months President Tuenibu was announcing new policy after new policy. Are these reforms actually working in favor of the naira.
We could say it's waking.
They reduced the different shop between the parallel market rate and the official market rate.
That has light little worked.
From about seventy percent the French ship between the official rate and the parallel market rate, it.
Has dropped to almost nail.
In fact, we have had seen situations where the parallel market rate is weaker or is stronger than the official market rate, so that multiple rates or the rate to the friend ship between the official market rate and the parallel market rate no longer exists practically in the market, and that means more people are willing to bring in dollars through the official market than through the power market. And that has also led to improved liquidity in the
official market. So we could say in that sense it has worked. The naira is weaker, but somewhere around much we saw it actually appreciated strongly and became the world's best performing currency, moved up almost I think thirty to forty percent before I say, losing ground in apriy again.
And how has this and some of the other reforms t Nubu has put in place actually had an impact on the economy in Nigeria.
Yeah, it's been a bit devastating for a lot of people on our people on the streets. The sharp devaluation and the currency, along with the partial remover of subsidy, has led to a spike in inflation, which was already rising even before the devaluation of the currency. So inflation is currently at nearly a three decade high and keeps rising as almost at ten three seven percent of the about as of match food inflation is higher at forty percent.
And that's huge because if you consider them, most Nigerians spend more than half of their incommon food. That means they sharp rise and food prices has forced most of them to prioritize food expenses above other necessary expense like medical care and education.
For people who are not local to the region, to Nigeria, what does that look like if you're going to the grocery store. How is that translating Well.
Most Nigerians shop in the open market. One practical example is Nigeria's popular jelove rice.
We love jela rice.
Yeah yeah.
So as at match, the price of rice, the main ingredients for gelo of rice jumped up by one hundred and fifty percent. That's almost nearly three times the normal price. So a lot of people may no longer be able to eat youell of rise on the daily basis because the price has jumped up significantly and can no longer afford it.
I bet that, Anthony. If you were to ask the ordinary Nigerian versus maybe a market participant, whether Tinubu's reforms are actually working, they may have strikingly different answers.
So on the streets, everybody thinks is failing. There's been some trends on x where people have been trended in tenubumas go. That's because they feel he's costing a lot of suffering for people. So yeah, So there's a huge differential between how investors and foreign portfolio investors and analysts look at the economy and the way ordinary people on the streets look at the economy. For ordinary people on the streets. They are not seeing any benefits in what
the government is doing. But for the analyst, what Tenubu is doing is writing and he's taking the steps in the right direction.
And what about businesses, Anthony, is this a more stable environment for the private sector?
Yeah, for the private sector for the long term. Most of them see the likely positive outcomes of the current reforms, but currently most of them are suffering. Most of them have run into heavy losses basically because of the huge devaluation and the currency or the nearly seventy percent evaluation and currency has plunged most of them into losses. That's because most of them had foreign currency obligations. Most of
them are struggling to survive. But most of them are positive in the sense that if they survive the current reforms and they are sustained, then they think in the long run naturally will be a better place to operate in. But in the short term, they are seeing a sharp erosion of people's purchasing power. They are seeing a sharp erosion of the groups that they've been having the last.
Few years in Nigeria.
Most of them will have to recapitalize and so they are calling on equity from their parents, companies and from shareholders to be able to recapitalize and survive the difficult period. On the positive side, most of them are able to meet their all our obligations currently from the market, which was in the situation before.
Now stay with us after the break, we'll discuss how the nyro's crisis and the president's reforms are affecting the informal sector and what Nigeria could do to boost its economy. Welcome back, So Anthony, tell us how's the naira and also Tinubuo reforms affecting the informal sector which is a significant portion of the economy and also small businesses.
I think the Agency put Nigeria's informal sector at almost ninety percent or more of the economy, so this for them is a huge deal. But one of the biggest areas Tess factored them is in the working capital. So suddenly they realize that they need more money to buy the goods that they used to buy.
So Anthony, what's your sons, When will growth actually pick up and where will it pick up? Is it the oil sector for Nigeria or are there other sectors that the country is looking to.
The oil sector is the low hangering fruit. Current production crude production is around one point two three million barrass a day, but Nigeria's potential capacity to produce crude is somewhere around one point eight to two point six million barrass per day. So if Nigeria were able to tap into its available capacity, it could actually increase oil production and were between forty to fifty percent in the next
few months. That has been difficult because of oil theft, old assets that are difficult to push up, and then a lot of bureaucratic challenges. But oil is one of the easiest areas that Nigeria quick is a add growth push grout. Then there's also the on aiir sector, reforms around taxation and those areas are areas and nairaku boost revenues and anthony.
Just to wrap up, I'm not going to ask you to protect where the naira is going to go next. I don't think that would be fair, but maybe you can give us some insight into what to look for in terms of what might drive the next price action of the naira. There must be something that you're waiting out for.
It's a bit difficult to say. In the short term, the government is suspecting some influ so the government has relied so far on portfolio inflows to drive liquidit in the foreignes chain market. That seems to be running out, so the government is now has to look beyond that to get some influs in immediately. They're expecting a billion dollars from the Afrasing Bank out of a three pint three billion dollars that today asked for, they've already gotten
two twenty two billion. There's a World Bank loan that they're expecting. There's two point two billion dollars maybe in June, and then I think maybe another one billion dollars from Africa Development Bank. If all these moneys come in between now and June, maybe they will help support the nyra and we could see some strengthening soon. But if they don't come, then the naira will be in trouble. Beyond that, the other support for the naira could be in increased
oil production. Then that will bring in more dollars to support the currency. That's more sustainable in the long run than the borrowings that the government is expecting because those borrowings also means additional interest suspenses, which will eat away at liquiditing the long run. Again, the last and most sustainable one would have been to go to the MF to take a huge loan. So analysts estimate that Nagua could get up to twenty billion dollars if it's proved
the MF. But the Nigerian government actually sees the IMF at of an anatma something that they will never discuss or something that they would never want to consider.
That and our thanks to Anthony Os Brown, there are Nigeria Bureau Chief speaking with us giving us his insights in Legos. This program was produced by Leone Wadrago with the help of emmele Ou. You can hear more stories like this one on the Next Africa podcast, available every week wherever you usually get your podcast. I'm Jennifer Zabastaja. Thank you for listening.