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In economic history, there are countries without national currencies. They just adopted a major currency near them to meet the intricacies of national currencies.
Since 1970, when Nigeria changed from the British Pound and Pence to the Naira and Kobo, Nigerians have not enjoyed a favorable foreign exchange rate in its economy. The good and happy days of General Yakubu Gowon when the Dollar was exchanged for less than a Naira were truncated by Brigadier Muritala Muhammed’s coup. But this did not last enough time and only had to be completed by General Olusegun Obasanjo. It was the regime of General Ibrahim Badamosi Babangida that opened the worm that destroyed the foreign exchange rate and the Nigerian economy with the Structural Adjustment Program (SAP) in 1976. Nigeria’s foreign exchange rate and the economy have never seen any normality ever since then. The Naira/Dollar in 1986 (just about 20 years), which was exchanged for less than N1.00 is today almost N1,800. That was how Nigeria and 95% of the Nigerian economy have been SAPPED out of the impoverished Nigerians.
Currently, Nigeria’s currency is ranked the 10th weakest in the whole world. Wherever the currency goes, there the economy goes. A weak currency breeds a weak economy, a weak and destabilized economy and country. This is due to some internal policies, and economic situations, like inflation in the country. The American Dollar is the most popular but not the strongest in the world. Yet, today it is the currency of the world.
The value of a country’s currency depends on the demand and supply in the country. While some are pegged – that is, the currency is valued at an agreed rate, the foreign exchange rate is an indicator of a country’s economic wealth and health. Through it, the economic future of a country is clearer or more depressed.
The exchange rate of a country is not usually stable, it fluctuates as dictated by the market rate. Let’s quickly talk about the factors that determine the foreign exchange rate, which are the Inflation and Interest rates:
Inflation: If the level of inflation of a country is low, the currency will have a higher value but if it is the other way, as it is currently in Nigeria now, the value of the exchange rate drops. Inflation is a big influence on the currency exchange rates of a country.
Interest Rates: A change in the interest rates of a country can have an impact on the currency’s value. If it rises, lenders will want more interest and this would attract more international investment. This would automatically lead to a rise in exchange rates of the currency of the country. As earlier said Nigeria has the 10th weakest currency in the world from the least weakest.
The Naira exchange rate with the US Dollar has been fluctuating for years now. The currency became weaker due to recent fiscal and monetary policies like ‘floating’ the Naira. Remember Nigeria imports more than exports goods and services which results in a constant need for foreign currencies, especially the Dollar. Nigeria’s economic diversity is almost zero. The country is about 90% dependent on oil revenue. However, this major export product has failed to supply enough Forex to the exchange market. This is because of the importation of refined oil for local consumption. This abnormal economic policy creates political uncertainty resulting in the devaluation of the Naira and has made it difficult to have an exact figure for a Dollar to Naira exchange rate, at least for three days a week. This is despite the production and sales of Dangote Oil in Nigeria. As of the time of writing this, one US Dollar is equivalent to 1,750 Naira.
However, some countries have managed to stabilize their currencies to an extent. There are currencies relatively regarded as the strongest within the African continent.
10 Strongest Currencies in Africa:
1. Tunisian Dinar (TND)
The Tunisian Dinar is the official currency of the Republic of Tunisia. Dinar is managed by the country’s central bank, “Banque Central de Tunisie” established in 1958. TND has now become the strongest and one of the most reliable currencies in Africa. A US Dollar equals 3.1 in Tunisian dinar.
2. Libyan Dinar (LYD)
Libyan Dinar is the authorized currency of Libya and it’s usually called “jenh” or “jni.”
Currently, 1 US dollar is 4.8 in Libyan Dinar.
3. Moroccan Dirham (MAD). The Moroccan Dirham is the authorized banknote of Morocco. 1 USD is equivalent to 9.9 MAD.
4. Botswana Pula (BWP). Botswana Pula is the official currency of Botswana. Currently, the dollar in Pula is 13.6.
5. Seychellois Rupee (SCR). Seychellois Rupee is the official note of the Island currency Note of Seychelles. 1 U.S. dollar now is about 13.9 rupees.
6. Eritrean Nakfa (ERN)
Eritrean Nakfa is the only licensed currency in Eritrea. It replaced the Ethiopian birr in 1997. But now it is matched with the U.S. dollars at a fixed rate of 1 dollar to ERN 15.
7. Ghanaian Cedis (GHC). Ghanaian Cedis is the official banknote in Ghana. A US dollar equals 15.5 GHC.
8. South African Rand (ZAR). The South African Rand is the national banknote of South Africa. A US Dollar to Zar is presently 18.2.
9. Zambian Kwacha (ZMW). Zambian Kwacha is the official notes of the Republic of Zambia controlled by the Bank of Zambia. A US Dollar now is 26.4 in Zambian Kwacha.
10. Egyptian Pound (EGP). The Egyptian Pound is the official currency of Egypt. Currently, 1 USD is 48.5 in EGP.
Nigeria never had the Dollar at N48.50 to a Naira. In 1999 the Dollar jumped from $1=N21.89 to $1 = N85.98 (2000), which was almost double.
CAN NIGERIA DO AWAY WITH ITS LOCAL CURRENCY?
Yes, most countries indeed have their official currencies, but a few other places do not. Instead, these nations rely on the currencies of other countries for their day-to-day transactions. This might seem unusual, but it helps these countries stabilize their economies and avoid the risks and the daily embarrassment of managing their own money without any success like Nigeria.
According to the International Monetary Fund (IMF), some countries don’t have a local currency. They may not be as big as Nigeria. They include:
El Salvador: El Salvador is a small Central American country, that adopted the U.S. dollar as its official currency in 2001. Before that, it used its currency, the colón. By switching to the dollar, El Salvador aimed to stabilize its economy, attract foreign investment, and reduce inflation. These, they have succeeded in achieving. Today it is a more respectable and responsible nation.
Ecuador: Ecuador abandoned its currency, the sucre, in 2000 after facing a major financial crisis as Nigeria has been facing since about 25 years ago without reprieve even for one year. The country switched to the U.S. dollar to regain economic stability.
This change allowed Ecuador to curb inflation and attract foreign investment. Using the dollar has brought economic stability but also limits Ecuador’s control over its monetary policy.
Kosovo: Kosovo, a small country in the Balkans, uses the euro as its official currency even though it’s not a member of the European Union. Since Kosovo declared independence from Serbia in 2008, it has relied on the euro to support its economy.
Using the euro has helped Kosovo maintain both the very necessary economic and political stability, especially in its trade relationships with EU countries.
Montenegro: Montenegro, is another Balkan country, that also uses the euro without being a member of the EU. After gaining independence from Serbia, Montenegro adopted the euro to promote economic stability and ease trade with Europe.
5. Liechtenstein:
Liechtenstein, a small European country, uses the Swiss franc as its official currency due to its close ties with Switzerland. The Swiss franc’s stability has contributed to Liechtenstein’s strong economy and stable financial sector. By adopting Switzerland’s currency, the country benefits from the same financial and political stability without needing its currency.
These countries without a local currency each adopted a foreign currency for unique reasons. Their examples show how nations adapt their economies to ensure stability, growth, and comfort of their citizens without the comfort of producing their banknotes and corruptly enriching themselves.
Since 1975, Nigeria has faced economic instability, foreign exchange uncertainty, and political instability. The rate of inflation started on the rise in 1976 and has remained on the increase ever since. In summary, Nigeria has never enjoyed a moment of stability with her foreign exchange rates with the dollar as the benchmark.
President Bola Ahmed Tinubu did not start the fall of the Naira of Nigeria and the consequential fall of Nigeria. Tinubu meant well when he said EMILOKAN during the 2023 Presidential election. He knew the Nigerian social, economic, financial, and political considerations of Nigeria. He was not an outsider. He was a very deep insider of the Buhari Administration. No policy and no politics is unknown to Tinubu before taking the official tenancy of the Asokoro Villa. If I were Tinubu, and knowing what I know about Nigerian politics, economics, and finances of Nigeria, I would have taken a very different approach that would be great and different from that of President Mohammed Buhari.
Very unfortunately, Tinibu did not take the bow of Nigeria’s success on May 29, 2023, when he was sworn in. I don’t see any way through before 2027. Nigeria has just been awarded the Silver Medal for being the second highest cost of living country in Africa excluding rent in 2024 by Business Inside Africa. Nigeria deserves better. Let us have the courage to take action to solve this problem of Nigeria once and for all times. Let us now with all our courage surrender our local currency, the abased Naira, to either the UK or the US for our adoption of the £ or $ as our local currency. After all, every market man and woman, all our artisans are aware that our Naira has always been controlled from outside Nigerian borderlines. Thereby, ending almost our 50 years of “suffering and smiling” emanating from recurring foreign exchange – economic, and financial, instability, poverty, corruption, and all infrastructural deficits in Nigeria. We can put our pride, shame, and territorial integrity on the sideways and do the needful for the sake of this and our unborn generations.
I know some people will call me all sorts of names including colonial bigots, a man with a colonial mentality. What have we benefited from our “Flag Independence”? The Tree planted on October 1, 1960, by Princess Alexandra of Kent who represented the Queen of England at the ceremony of the “Flag Independence” was never fruitful before it was uprooted. So also the “Charter of “Freedom” presented by the Princess of Ken as the Article of the “Flag Independence” was also shredded on January 16, 1966, during the first Military Intervention.
Let us just imagine we had tried this dollar or pound adoption since 1960 after our Flag Independence. If we had tried the adoption during one of the many military interventions, we would have gotten stabilized by now economically, financially, and politically. Maybe we would have been stronger to be fully on our feet not as a Third World country but as a developed country.
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