Business
Cross-Border Traders Abandon Businesses as Naira’s Value Plummets
The Nigerian Naira’s continuous decline in value has had a significant impact on cross-border traders and the economy. At the close of business last Friday, the Naira traded at N2,010 per CFA1000 in the West African sub-region.
Over the weekend, the Naira traded at N1,870 per CFA1000 in the open market, and just last Thursday, it was sold at N1,800 at one of Nigeria’s busiest land borders, the Seme-Krake border in Lagos.
This ongoing devaluation of the Naira has led many cross-border traders to abandon their businesses, and it has also had a ripple effect on the prices of commodities. For instance, petrol is now being sold at a record high of over CFA 1000 (approximately N2,010) per liter. This has made smuggling of petrol a lucrative business since the removal of subsidies in May.
Furthermore, the scarcity of CFA Francs in circulation has forced markets in Niger Republic’s bordering communities to transact in Naira. Residents and traders in these areas have reported that Naira is now the dominant currency in provinces bordering Nigerian states like Borno, Yobe, Kano, Katsina, and Sokoto.
Aminu Abdulkadir, a resident of Diffa, mentioned that the CFA Franc has become extremely scarce in Niger Republic since a military coup. He noted that Naira is widely used for transactions, except at filling stations and for government revenue remittances.
The scarcity of the CFA Franc has compelled many businesses to switch to the Naira, which is more readily available. Some traders have attributed the CFA Franc shortage to government officials’ hoarding and suspicions of external influence, while others claim that Nigerians are coming into Niger to exchange CFA Francs for dollars, causing the value of the Naira to drop further against the Franc.
As a result of the Naira’s steep devaluation, cross-border businesses, such as the trade of rice and frozen poultry products, have become significantly less lucrative. The price of a 50kg bag of rice, previously selling for N9,000 to N12,500, has surged to about N35,000 across the Seme border. Similarly, a carton of frozen poultry products, previously priced at N8,000, is now being sold for N28,000.
Traders who used to benefit from cross-border business are now facing financial challenges, as the Naira’s value continues to deteriorate. John Ebube, a trader in Lagos, highlighted that the Naira’s decline started around two months ago, with the exchange rate plummeting from about N1200 to CFA 1000 in August to the current rate of N2,010.
Despite oil sector reforms, the CBN released $1.25bn for fuel imports in 2024, 40% higher than last year, amid continued demand for petrol.
The Central Bank of Nigeria (CBN) has allocated a total of $1.25 billion to oil sector operators for the importation of petroleum products and related items into the country between January and September 2024.
This represents a 40 per cent increase compared to the $891 million released during the same period in 2023.
Despite the ongoing reforms in the Nigerian oil sector and the removal of fuel subsidies, fuel imports remain a significant part of the country’s fuel supply. Marketers have insisted on continuing fuel imports, despite the availability of petroleum products from the Dangote refinery, which began operation in 2024.
The $1.25bn released for fuel imports between January and September 2024 is crucial, as fuel imports are a major consumer of foreign exchange, impacting Nigeria’s foreign reserves and influencing the value of the naira against the dollar.
In addition to the funds allocated for petroleum imports, the CBN also disclosed that 19 other sectors received $18.78 billion in foreign exchange allocations within the same period.
Fuel Price Deregulation and Its Impact
In October 2024, Nigeria fully deregulated its petroleum market, allowing refineries to sell directly to marketers.
This led to an immediate increase in petrol prices, reaching N1,060 per litre before being reduced to N935 per litre in December due to a pricing war between the Nigerian National Petroleum Company Limited (NNPCL) and the Dangote refinery.
Data from the CBN’s quarterly statistical bulletin shows that the bank released varying amounts each month, with fuel import transactions peaking in March at $334.47 million. Forex for fuel imports fell to $106.48 million in April but rose again in the following months.
Nigeria’s Petrol Import Bill
In the third quarter of 2024, Nigeria spent N5.14 trillion on importing mineral fuels, which accounted for 35 per cent of the total N14.67 trillion worth of goods imported during the period. In the second quarter, Nigeria’s petrol imports reached N3.22 trillion, the highest on record.
This surge in fuel import costs has been attributed to the continued reliance on foreign exchange for both petrol and crude oil imports, despite efforts to boost local refining capacities.
The Crude Oil Refinery Owners Association of Nigeria (CORAN) has noted that dollar charges on locally refined petrol, coupled with the cost of importing crude, contribute significantly to the high price of locally refined petrol.
CORAN has also called for the Nigerian Maritime Administration and Safety Agency (NIMASA) to fix charges in naira to help reduce costs.
Outlook for 2024
With a significant portion of Nigeria’s foreign exchange going towards petroleum imports, the country’s forex reserves and the stability of the naira remain under pressure.
As the government continues to push for reforms and improvements in the local oil sector, the reliance on imported fuel continues to shape the nation’s economic landscape.
The Onion Producers, Processors, and Marketers Association of Nigeria explains the factors behind the rising cost and scarcity of onions in the country, citing flooding, climate change, and storage challenges.
The National President of the Onion Producers, Processors, and Marketers Association of Nigeria (OPPMAN), Mr Aliyu Isah, has explained the reasons for the recent surge in onion prices and the scarcity of the produce in the country.
In an interview with the News Agency of Nigeria (NAN), Isah attributed the price hike to several factors, which have significantly impacted the production and availability of onions across Nigeria.
According to Isah, from the fourth quarter of 2024, onion prices escalated dramatically, with a bag now selling for between N250,000 and N270,000, compared to N70,000 to N90,000 per bag in earlier months.
The price of a medium-sized bulb has also increased, now selling for N500, up from N50 per bulb.
Isah outlined key reasons behind the price increase, primarily highlighting the devastating effects of flooding in the northern states.
“The flooding of 2024 that ravaged all our onion farms, from Sokoto, Kebbi, Zamfara, Kano, Kaduna, Katsina, and up to Adamawa states, led to a severe shortage,” he said.
Additionally, the release of water from dams, such as the Goroyo Dam in Sokoto, exacerbated the situation, damaging onion beds and farmland across the region.
He also mentioned the breakage of dams in Borno State, which destroyed additional onion farmlands, further compounding the supply issue.
Another major factor, according to Isah, was the extended rainfall and high humidity levels in northern Nigeria during 2024, which led to a disease outbreak known as Downy Mildew.
“This disease destroyed most of our onion farms at various stages of cultivation, from seedlings to harvest,” Isah explained.
The shortage of quality onion seedlings has also contributed to the rising prices. The flooding and climate change impacts disrupted local onion seed production, forcing farmers to rely on imported hybrid seeds. Unfortunately, some of these seeds were found to be adulterated, leading to further losses.
Post-harvest losses due to inadequate storage facilities also play a significant role in the price surge. Isah noted that more than 50% of the harvest is lost after production due to the lack of advanced storage technology, making it difficult to preserve onions after harvest.
Despite these challenges, Isah assured that the association is working with the Federal Government to find solutions to boost onion production and address the ongoing price surge.
Nigeria’s VAT revenue soared to ₦1.78 trillion in Q3 2024, marking a 14.16% quarterly rise and an 88% jump from Q3 2023, says NBS.
The National Bureau of Statistics (NBS) has reported that Nigeria’s Value-Added Tax (VAT) revenue surged to an impressive ₦1.78 trillion in the third quarter of 2024, reflecting a 14.16% increase compared to the ₦1.56 trillion recorded in the second quarter.
This figure also represents a substantial year-on-year rise of 88% from the ₦948 billion collected in Q3 2023.
Also read: Economic crisis drives private hospitals to collapse, says ANPMP chairman
VAT, a consumption tax managed by the Federal Inland Revenue Service (FIRS), is distributed to the federal, state, and local governments through the Federation Accounts Allocation Committee (FAAC).
The latest data highlights the growing importance of VAT as a significant revenue source for Nigeria’s economy.
The NBS report details the components of the Q3 2024 VAT revenue:
- Local VAT payments: ₦922.87 billion
- Foreign VAT payments: ₦448.85 billion
- Import VAT: ₦410.62 billion
Sectoral growth rates varied widely, with human health and social work activities recording the highest quarter-on-quarter increase of 250.39%, followed by household-related activities at 102.09%.
Conversely, sectors like water supply, sewerage, waste management, and extraterritorial organisations saw declines of -41.92% and -36.14%, respectively.
In terms of sectoral contributions, the top three sectors driving VAT revenue were:
- Manufacturing: 22.21%
- Information and Communication: 20.89%
- Mining and Quarrying: 18.90%
The sectors with the least contributions included:
- Household activities: 0.01%
- Extraterritorial organisations: 0.01%
- Water supply and waste management: 0.03%
This growth in VAT revenue underscores the resilience of Nigeria’s tax system in a challenging economic environment, reflecting both expanded compliance and increased economic activity.
As the government continues to implement reforms, VAT remains a critical pillar of its revenue mobilisation strategy.
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