Citizen is a column that explains how the government’s policies fucks citizens and how we can unfuck ourselves.
CTRL J – Japa
Last Friday, Jason Njoku, the CEO of Video-on-Demand platform Iroko TV dropped a not-really-bombshell bombshell on Twitter. He announced via a blog post and Twitter threads that the tech company is fully exiting (read: leaving) Africa after so many years of losses and losses.
Amidst a series of reasons about why the company loses about $300k monthly because of its Africa operations, Jason Njoku spoke of how the CBN Naira devaluations of this year and the previous years have greatly affected the business. For example, in 2015, a N3,000 annual plan was introduced for customers, which was converted at $18 (N166/$). In 2017, that N3,000 plan became $8.33 (N360/$). Today that N3,000 plan is $6.3 (N477/$). And there’s still more devaluation coming, allegedly.
You can see what happens when a currency keeps falling to another. Money keeps leaving the table. Miraculously.
Why Is The Naira Always Falling To The Dollar?
One phrase – Demand Imbalance.
Nigerians generally need dollars to meet a lot of obligations – including for international school fees, business travels, medical expenses, international airlines tickets, student maintenance allowance, including the importation of crucial raw materials.
What’s more? There is no actual dollars to meet those demands. Our traditional means of gaining dollars which gives us 90% of foreign exchange earnings is through the sale of crude oil, but the Covid-19 pandemic means we are selling less oil for even lesser prices.
Our other sources are all depleted at this time. The Forex reserves which is supposed to serve as a buffer in these times has a little over $36 billion dollars in its coffers, an amount certainly not enough to bridge the dollar demand gap.
All of this means that when the market smells a dollar scarcity, traders begin to hoard the dollar. The price then goes up and and you need more Naira to buy it. The Naira’s bandwidth is then widened through devaluation to allow for a purchase of dollars, and cycle continues.
How Will You Survive These Times?
Tbh, we don’t know. You can send a mail to Godwin.Emefiele@cbn.gov, or pray that oil prices miraculously begin to trade for around $70 and above. But, reading all of our Naira Life stories is a good place to start. May the force be with you, and with us.
Check back every weekday by 10am for more Zikoko Citizen stories.