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The parents are grappling with the impact of the naira fall
as expenses surge, leading to a sharp increase in the cost of funding their
children’s education abroad due to unfavourable exchange rates.
The naira, on Friday, recovered to 907.11/$ on the official
Investors and Exporters’ foreign exchange window after falling to 1,043.09/$ on
Thursday.
This is a 13.04 per cent appreciation from Thursday’s
figure, according to data from the FMDQ Securities Exchange.
Trading on the last working day of 2023 began at N911.67/$,
it rose to a high of N1,224.10/$ and fell to N700/$, before closing at
N907.11/$. Forex turnover improved marginally to $89.30m, a 6.78 per cent
increase from the $83.63m it was the previous day.
At the parallel market, the naira closed the year at
N1,195/$. A Bureau de Change operator said, “The dollar is N1,195. The
difference between the buying and selling rates today is about N6/N7.”
On Thursday, the currency fell to a low of N1,043.09/$, its
second time hovering above N1,000 at the official FX window. On December 8, it
fell to an all-time low of N1,099.05/$ on the I&E window.
Since the apex bank declared that it was reintroducing the
‘willing buyer and willing seller’ model for the currency, the naira has
continued to be volatile due to supply issues.
Recently, the World Bank noted, “However, there is also a
need to increase FX supply in the market. Facilitating FX flows, especially
from all exports, through the NAFEM can help provide additional volumes in the
official window that can help provide stability. In addition, clarity on the
CBN’s net reserve position, and on the CBN’s continued progress in clearing the
FX backlog, would also strengthen market confidence.”
Foreign reserves dip
The foreign exchange reserves dipped to a six-year low of
$32.87bn at the end of December, according to the CBN data, with the naira
becoming the third worst-performing global currency in 2023 due to a backlog of
unsettled forwards, undelivered promises of dollar inflows and a two-decade
peak in inflation, according to Kyle Chapman, FX markets analyst at
London-based Ballinger & Co.
The over 50 per cent drop in the value of the naira made the
apex bank run down the foreign exchange reserves, which peaked at $47.63bn in
June 2018. The reserves fell in December to a level last seen in September
2017, when it stood at $32.16bn.
Chapman said, “The naira’s downward momentum is likely to
continue through much of 2024, and its ultimate trajectory will depend on
whether the CBN’s rhetoric transforms into concrete policy moves that drive up
the flow of US dollars into Nigeria and shore up trust in the official market.
“If the CBN’s promised measures materialise and Tinubu’s
government enacts structural changes to increase oil production or to drive
foreign investment, there is plenty of opportunity for the naira to lift from
its record lows. But a quick fix is unlikely, and further depreciation will
come to counteract supply and demand imbalances.”
Experts said the root causes of the naira’s decline were
multifaceted, including economic instability, political uncertainty, and global
market fluctuations.
Manufacturers list woes
Manufacturers have lamented that the naira depreciation has
led to an increase in operating costs for industrialists whose major costs,
including finance costs, are denominated in foreign currencies.
For instance, six consumer goods companies listed on the
Nigerian Exchange Limited posted a total net loss of N179.561bn in the first
half of 2023 due to foreign exchange crises.
The companies are Guinness Nigeria, International Breweries,
Nigerian Breweries, Nestle Nigeria, Cadbury Nigeria, and Dangote Sugar
Refinery.
They all attributed the loss position to a significant
increase in unrealised FX loss and higher net finance cost.
Also, in an earlier interview with The PUNCH, the Chairman
of the Nigerian Association of Small and Medium Enterprises, South-West, Dr
Solomon Aderoju, said the forex crisis would kill many industries.
According to him, the cost of production is increasing
following the fall of the naira.
He stated, “Some of us that have borrowed money from the
banks will not be able to honour our obligations. It’s a multiple problem. They
will not be able to service the loans. Some of us import our raw materials from
other countries, which means the cost of raw materials will also be mounting.
“These problems will kill SMEs. As I speak, many businesses
have closed up because of these problems.”
The Chairman, Nigerian Economic Summit Group, Mr Niyi Yusuf,
identified some major consequences of the declining naira value.
“This will lead to increasing imported inflation as prices
of imported items will increase, while also increasing export income in naira
for those who export goods and services,” he stated.
The Director-General, Nigeria Employers’ Consultative
Association, Mr Adewale Oyerinde, noted that the forex situation posed a
significant obstacle to procuring essential inputs and was causing disruptions
in financial projections, adding, “The escalating forex issue is hindering
progress, and until it is resolved, our endeavours cannot take flight.”
Parents in a fix
For a Lagos-based businesswoman, Mrs Busola Adeyinka, whose
two children are in universities in the United States, the high exchange rate
has put her under a lot of pressure.
Her older son, who is at the 200-level at a university in
California, will need nothing less than $43,843 for tuition alone.
With the current exchange rate, she said she would have to
spend at least N38m just to clear his tuition.
She also noted that her second son, who just completed his
A-levels in the US, also gained admission at another university in the state to
study Pharmacy.
She said, “Their school fees put together are provided by me
alone. Their father has since passed away. I am a businesswoman. I make my
money through business. With the dollar almost hitting N1,300 how do we manage?
“If not that the other one has already gained admission, I
would have withdrawn him to a university in Kenya or South Africa. The reason I
took them there is to avoid the many crises we have come to know as normal in
the Nigerian university system. I wanted them to have a smooth ride. As it is
now, I don’t know what to do in January.
“I have, however, applied for forex through a friend who has
a similar problem and we are looking at how we can manage to pay up. It is a
confusing period for me as a parent; the government needs to help me.”
Another parent, who recently retired from the Nigerian
Television Authority but did not want to be named, told one of our
correspondents that her daughter had just been admitted to study Finance in the
US.
She noted that sourcing forex with the current exchange rate
had been difficult.
She stated, “It has been hellish for me. If not for my
daughter suffering to gain this admission after four years of staying at home,
I would have let it go. I am breaking the bank. It is just so sad that the
naira does not have value.
“I schooled in the UK during my time, and I tell you that it
was not that bad. The naira was strong. The government needs to do something
about the problem. There should be an intervention of some sort for people like
us so that we will be able to survive this exchange rate regime.”
The father of a 300-level medical student in the US, Mr
Olabode Rotimi, said he was tired of appealing to the government to make the
exchange rate better.
He said, “My Christmas was a depressing one. I was looking
for forex like I wanted to start a Bureau De Change. It is so bad. The rate is
so high. If I had known, I would have stocked more dollars in my domiciliary
account, but with the unification of the exchange rates by this government, I
thought things would stabilise.
“I just paid for my son’s accommodation in September or so.
January is supposed to be for tuition. I have asked him to apply for an
extension or file for any form of subsidy for international students because it
is tough on me.”
NAPTAN begs govt
The National President, National Parent-Teacher Association,
Mr Haruna Danjuma, pleaded with the Federal Government to intervene in the FX
crisis, adding that many parents might be forced to withdraw their children
from schools abroad.
He said, “We beg the Federal Government to please help us.
We are Nigerians and they are our leaders. They should help us. It is not the
fault of any parent who decides to send their children abroad. We should not
make them suffer too much because they are already suffering by paying through
their noses for their children and wards.
“One major reason people go abroad in the first place is
because of the situation of things in our institutions. We need the government
to work together with parents to see how we can solve the problems in the
education sector.”
CANUK seeks intervention
The Assistant Secretary-General of the Central Association
of Nigerians in the United Kingdom, the umbrella body of all Nigerian
associations in the UK, Mr Peper Shoyemi, whose office is in charge of students
and youths in the country, noted that the matter of high forex in Nigeria was a
double-edged sword.
He said, “The exchange rates are at high rates, and
secondly, there is no more subsidy from the central bank, which means sourcing
from the open market.
“It’s very tough and an unbearable financial burden on the
parents, which also puts the government in a difficult situation as the market
now regulates the exchange rates.
“A lot of parents have to sell personal belongings to be
able to meet the current exchange rates. Many have sold off landed properties
and even closed personal businesses just to meet up. It’s a dire situation.”
Travel agents unhappy
Despite concerted efforts by the CBN to address these issues
and stabilise the exchange rate, the situation remains volatile, leaving
travellers and parents with children schooling outside the shores of Nigeria,
as well as those going to schools in the country in challenging financial
situations.
An agent at Travel and Tours Limited, Maureen Chimaobi, told
Saturday PUNCH that reliance on the black market for currency exchange had led
to soaring costs, impacting various aspects of international travel, from visa
fees to hotel bookings and airfares.
Chimaobi expressed frustration over the apparent ease at
which black market traders were obtaining dollars in contrast to banks, causing
a ripple effect on ticket prices.
The agent said, “It has been quite tumultuous lately, given
the fact that people are opting for the black market.
“Foreign travellers have to source Basic Travel Allowance
from the black market traders, and we also rely on the black market to pay visa
fees and make hotel reservations.
“It poses a significant challenge because you end up
spending double what you could have if the forex is obtained from the banks.
“However, the most striking concern is how the black market
traders can readily provide dollars in whichever volume you want, yet the banks
do not have them.
“This situation has led to a hike in ticket prices,
resulting in low sales. Additionally, other payments involving the dollar are
also being affected.”
Citing instances of the rise in the cost of air tickets,
Chimaobi said routes such as Lagos-London, once accessible for less than
N800,000, now cost a minimum of N1.3m, leaving travellers paying considerably
more for their journeys.
According to the agent, currency instability has led to a
notable decline in travel sales, with a recent school tour to the UK having to
reroute through Cotonou, Benin Republic, due to exorbitant fares from Nigeria.
Chimaobi stated, “Previously, a round-trip ticket from Lagos
to London could be secured for less than N800,000, but now the cheapest on that
route is not less than N1.3m.
“Just recently, I issued a one-way ticket to Qatar for over
N800,000. Before, such a ticket could be obtained for as low as N400,000.
Travellers are now paying significantly higher prices.
“In mid-March, during my company’s school tour to the UK, we
had to reroute the journey to Cotonou due to exorbitantly high airfares from
Nigeria.”
The President, National Association of Nigerian Travel
Agencies, Susan Akporiaye, said there was still a huge demand for international
travels from Nigeria, despite substantial cost increases.
Akporiaye noted that contrary to expectations, the number of
requests for schooling abroad had not decreased.
“If you compare the school fees of $10,000 from early last
year to what you will pay now, there’s a 300 per cent increase, and yet the
demand for education abroad has not reduced; it keeps increasing despite the
high costs,” she said.
However, Akporiaye added that the unyielding demand was
causing challenges for travel agencies, resulting in the loss of business to
other markets.
She expressed concern over the financial burden of
travelling on the Nigerian populace, saying, “I don’t think any Nigerian smiles
paying that kind of money travelling abroad. But it’s usually a situation of
‘we have to do it’, or ‘I don’t have a choice’. Somehow, we just find our way
around it.”
The NANTA president said the impact of the fluctuation of
the naira on travel frequency was noticeable, with individuals adjusting their
travel patterns.
“For instance, those who used to travel thrice in three
months may now limit it to once in three months. Even in the low season, the
traffic is still there. I travelled in October and I still met lots of people
at the airport,” Akporiaye added.
Students lament
When the naira was floated in June, Nigerian students in the
United Kingdom complained that they were struggling to pay their fees. A
Nigerian student resident in Manchester, Deborah Adejoro, had said, “This
policy is affecting those of us here and even intending students. My sibling
has had to forfeit her admission because of this policy.
“Many students have fallen victim to online scammers because
they want to buy pounds; a friend of mine, for example, was a victim of
third-party purchase as the banks at home are not dependable.”
Another Nigerian student studying in Leeds complained, “Now,
they (parents) have to start looking for more money because the rate has gone
up. If the official rate is not different from the street rate, what’s the
essence of waiting for several weeks for your bank when you can just get it
from a third-party platform? It has only put more pressure on the students to
look for more money.”
A student, studying IT Project Management at Teesside
University, lamented, “Some people are not stable because they used to convert
their naira to pounds for school fees payment.”
Another Nigerian student (name withheld), who is studying at
Strathclyde University, explained that the new exchange rate might cause him to
drop out of school, saying, “This new reality has called for a review of the
whole plan entirely. Everything has to reset at the end of the year.
“My year is ending in October/November but I now have to
review everything. I am running a PhD programme and the cost is £20,000 a year.
When we were using Form ‘A’ and the official rate was about N600, it was about
N11m.” The PUNCH