The Naira recorded the second-worst quarter of depreciation in the second quarter of 2022. The black market exchange rate closed on July 10, 2022, at N616/$1, indicating a N51 depreciation when compared to the N565/$1 on the 31st of December 2021.
As at the 31st of March 2022, the black market rate was at N587/$1, which indicates a N29 decline in Q2 2022,11 Jul 2022.
Experts have explained at different fora that the factors causing the weakening of naira include the basic factor of supply and demand, saying if too much naira is chasing scarce dollars; the dollar gets stronger relative to the naira, and vice versa.
Others have argued that global economic shakeup Post-COVID-19 is also having an impact on the naira.
Another school of thought believes that the most important determinant of the value of the naira is whether or not the Nigerian economy is productive and competitive in international trade.
However, a technologist has a solution on how to save naira from further devaluation particularly with the launch of eNaira.
Dr. Oluseyi Akindeinde, the co-Founder and CTO of Digital Encode Limited, called the Central Bank of Nigeria (CBN) to implement eNaira on Blockchain Technology to increase its potency for global competition.
Speaking at the recent Nigeria Computer Society (NCS) International Conference themed: ‘Smart, Secure and Sustainable Nation’, Dr. Adindeinde argued that naira needs to be repositioned in the event of global economic shift and technological advancements for it to compete favourably.
“We have a problem of currency devaluation. The caveat is that I am not an Economist, but from a technology point of view you would want to ask: Why is the Dollar always sought after as a currency? The primary answer is economic value. Dollar has velocity. Dollar is the only currency you can easily use in any country.
“So, can’t we do the same with Naira? We need to export naira to make it happen. We have started with the eNaira but it is operating in a silo. Can we open up the eNaira and put it in a public blockchain technology.
“Last year, $19.2 billion(USD) was remitted into Nigeria. If you want to make Naira more valuable, then increase the demand. Speak to Nigerians in Diaspora to dollar with eNaira and remit the eNaira to Nigeria via the blockchain technology. The technology is there to help us.
“Apart from the Diaspora remittances, we can start accepting Foreign Direct Investments in eNaira. Recall that Emirates cried the other week; they couldn’t repatriate $85 million to the UAE. They even threatened to reduce flight operations to Nigeria. With eNaira on blockchain they don’t need to convert naira to dollar before fund repatriation, because anywhere you are in the world you can exchange the eNaira”.
But Mr. Folashodun Shonubi, a Deputy Governor, Operations Directorate at the CBN, speaking through a representative, technically disagreed with Dr. Akindeinde’s proposal thus:
“We believe that the eNaira has the same value as the normal Naira you hold. And if you are changing the money from one currency to another, there has to be a purpose for it; CBN wants to be sure you utilize the fund for the purpose you applied for naira to dollar and vice versa. We have a list of permissible items/activities for which we can allow you to exchange your money – if you want to pay school fees, or if you need the BTA. You can’t just wake up on your own with the decision to buy a dollar unless it meets the requirement. If you have documents to prove you, through our system, you will be able to get forex.
“The only recommended rate is I&E – Import and Export rate. What people call Black Market is just an opportunist situation we have to deal with in the country.
When asked how the exchange rate will be determined with eNaira on the blockchain?
Dr. Akindeinde said that it will largely be determined through a price discovery mechanism by market forces hence as the demand for eNaira increases it will increase its value against the USD and naturally reduce the demand for the United States dollar.
“The remittance is simply to set it off. It will kick-start the demand. What this means is that an Adire maker in Abeokuta can sell her Adire for eNaira and anyone in the world can buy it because access to eNaira wouldn’t now be restricted to people just in Nigeria.
“Anyone from any part of the world would be able to convert their USD to eNaira (on the blockchain) and patronize the adire maker and she doesn’t need to quote in usd or even accept credit card payments.
“It’ll open up markets yet unknown and will completely eliminate the alternative (black) market”, he stated.