With a drop of nearly 40% in just one week, following the government’s decision to no longer artificially support its price, the currency of Nigeria, Africa’s leading oil producer, but also has the second lowest life expectancy in the world, and is now 1,148 times lower than when it was created in 1973 against the US dollar. The integration of such a fragile economy into a West African monetary zone would therefore be very detrimental to the economies of all the countries in the region, including Anglophones.
2023 is the 50th anniversary of the naira, created on January 1, 1973. But while it was worth $1.52 at its beginnings (a dollar trading for 0.66 naira, or more precisely 0.657895), and its value strengthened even in its early years, until reaching nearly $1.85 in January 1980, the naira then experienced an uninterrupted succession of depreciations and devaluations, to the point that the value of the US dollar reached the level of 750.50 nairas on Wednesday, June 21. Thus, the Nigerian currency lost 99.91% of its value in just 50 years, which means, in other words, that it was divided by 1,148. While the 700 mark had been crossed on February 2, the recent government decision not to maintain its price artificially, since June 14 and for lack of sufficient foreign reserves, The value of the national currency, which lost 38.4% in a single week, fell again sharply, crossing the symbolic threshold of the division by a mile on 19 June 2023, according to the Centre d’étude et de réflexion sur le monde francophone (CERMF).
By way of comparison, the source indicates that the price of the Moroccan dirham has only been divided by a little more than two in the last fifty years against the dollar, while that of the CFA franc has been divided by about two and a half, the Tunisian dinar by nearly seven, and the South African rand by 23.
Nigeria’s poor economic and social indicators
CERMF argues that the continuing collapse of the naira only reflects the serious economic difficulties of the country, which has suffered for many years from poor governance, a high level of corruption and embezzlement, and a lack of diversification. And although Nigeria has been Africa’s largest oil producer for several decades, the country has still not succeeded in diversifying its economy, which still relies more than 90% of its exports on hydrocarbons. In the absence of having developed other significant sources of income, and of having created an environment favourable to investment and business, the country remains very dependent on the development of the price of hydrocarbons, as well as its production in this field (which is actually in continuous decline).
Nigeria’s poor economic performance is particularly evident in terms of economic growth. Indeed, over the last decade 2013-2022, the country recorded only an annual growth rate of 2.3% on average, a new rate that is even lower than its population growth (2.5%). At the same time, Côte d’Ivoire and Ghana had annual growth rates of 7.0% and 4.6%, respectively, while Senegal and Cameroon had annual growth rates of 5.2% and 4.0%, the text notes.
As a result, Nigeria’s decline has naturally had an impact on GDP per capita, which in early 2022 was only $2,066 (according to the latest World Bank data). The latter has recently been overtaken by those in Côte d’Ivoire (US$2,549) and Ghana (US$2,363), and should soon be overtaken by those in Senegal and Cameroon. Côte d’Ivoire’s performance is particularly remarkable, given that the country, which has become the richest in continental West Africa, has produced between 40 and 60 times less oil in recent years than Nigeria (and even six times less oil than Ghana, and three to four times less gold).
Finally, the economic situation in Nigeria is not without consequences for the standard of living of the population. For example, inflation has been fairly high for many years, averaging 12.3% per year over the 2012-2021 decade, according to the latest World Bank data. A level equivalent to that of Ghana (12.0%), but very much above those of Côte d’Ivoire (1.3%), Cameroon (1.9%), or Senegal (0.8%). Inflation is expected to remain high this year, particularly with the recent tripling of gasoline prices following the total elimination of government subsidies.
A radical measure which can be explained precisely by the particularly delicate financial situation of Nigeria, as evidenced by, among other things, the critical level of foreign exchange reserves of this great oil country, which is no longer able to honour its commitments towardsto foreign airlines, by preventing them from repatriating their income. The situation is so serious that Nigeria is even far ahead of the world in this area, with $812 million in funds frozen at the beginning of May 2023, which is more than a third of the total amounts withheld worldwide. (which in particular led to the temporary suspension of some Emirates flights in 2022).
Moreover, the CERMF notes that Nigeria, despite huge oil revenues accumulated since its independence (including hundreds of billions of dollars over the last two decades alone), has the second lowest level of life expectancy in the world, estimated at 52.7 years in 2021, again based on the latest World Bank data. The country even finished last in 2018 and 2019, before overtaking Chad again (52.5 years). Similarly, Nigeria has the fourth highest infant mortality rate in the world, with no less than 70.7 deaths per 1,000 live births, just after Somalia. Finally, it should also be noted that the country has achieved very poor electrification performance, with an electricity access rate of only 55.4% of the population at the end of 2020 (against, for example, 70.4% for Senegal, 64.7% for Cameroon, and more than 99% for each of the three Maghreb countries).
The consequences of Nigeria’s integration into a West African monetary zone
The integration of an economy as bad as that of Nigeria into a West African monetary zone can therefore only have very harmful consequences on the economies of all the countries of the region, given that Nigeria’s constant decline, combined with its demographic weight, would pull down all other countries, be they French-speaking, English-speaking or Portuguese-speaking. A problem that would not arise as much with the integration of other crisis countries such as Ghana, whose severe economic difficulties are absorbable, given the country’s “reasonable” demographic weight relative to its neighbours.
Thus, until Nigeria resolves its heavy structural problems, the country’s accession to a West African currency is likely to profoundly destabilize the economies of all the other countries sharing that same currency, through a significant loss of value, accompanied, moreover, by a monetary policy more adapted to a country in crisis, and not corresponding to the needs of the dynamic countries of the region (Nigeria, because of its demographic and therefore economic weight, probably largely dictating this policy). The WAEMU countries, which are well ahead in fiscal discipline and good governance over other countries in the region, are the most dynamic area in West Africa and the continent’s largest high-growth area, This would see their growth fall significantly, while at the same time seeing their inflation level rise sharply.
The source further notes that Nigeria’s economic decline is likely, in the long term, to significantly increase the emigration of Nigerians in search of a better life to countries in West and Central Africa, and in particular to Côte d’Ivoire, Ghana, Benin, Cameroon, Gabon and Senegal. And given the population of Nigeria, these countries will then have to face what could be a real migratory shock, especially those of West Africa, where ECOWAS rules provide for freedom of movement and residence for nationals of member countries.
