Insecurity and Currency Devaluation in Africa: A Case Study of Nigeria
Insecurity and Currency Devaluation in Africa: A Case Study of Nigeria
Introduction
Geography and history have truly taken its toll on Africa. Africa, the cradle of civilization, continues to be an enigma to the rest of the world. The continent commonly referred to as the Dark Continent has suffered from gross prejudice, stereotype, discrimination, and neglect from the rest of the world. Most Europeans and Americans see Africans as inferior, living in the jungle (forest), uncivilized, primitive, violent cannibals and so forth. But obviously, recent occurrences in Africa have proved them true even though not in toto. The genocide and ethnic violence in Sudan, anarchy in Somalia, twenty-year-old civil war in Congo, religious violence in Nigeria, the prevalence of diseases in the region that has been dubbed the cradle of human evolution raise an eyebrow and puts a question mark on whether or not Africa truly have a government. The issue of insecurity and religious insurgence is a critical discussion as the Africa’s most populated country continues to suffer near defeat from a small religious group called Boko Haram. Besides, the level of endemic corruption that pledge this region of the world is unimaginable. This paper explores the question regarding issues of confrontation and insecurity in Africa by taking Nigeria as a case study.
Insecurity in Nigeria
The word ‘Africa’ literally echoes insecurity to most foreigners. This could explain the reason for the limited foreign investment in the Black Continent. Nigeria for one is one of the African countries famous for its insecurity issues. Nigeria, commonly known as the giant of Africa, has faced untold insurgencies and terrorist activities that seemed to overpower its military base and powers. Adekoya (2015) painted the picture rather clearly by stating that ‘Nigeria is at war.' Furthermore, he revealed that the Islamic militant group, antipathetic to western education, have slain hundreds, if not thousands, of people in the north-eastern part of the country. They perform these heinous acts with the help of suicide bombers, including a 10-year-old girl. Amazingly, the group has even taken over towns and villages that stretch more than 20,000 square miles and has declared their caliphate in a region occupied by up to 1.7 million people. Surprisingly, the terrorist group seemed to have information on some sensitive military issues and was always some steps ahead of the Nigerian army in the battle field. Subsequently, this confirms the fact that the Nigerian military might have been compromised. The government seems to be at ease with these maladies and does little or nothing to put an end to the mess or perhaps have not really done what it is supposed to do. What makes the situation in Nigeria very pathetic is that the country and its citizen has been faced with a lot of unimaginable challenges and with the issue of insecurity adding to it, life is made unbearable for the poor masses of Nigeria. The issue of the epileptic power supply and outages, corruption, fraud, unemployment and so forth makes Nigeria as well as most of other African countries living hell and obviously confirms what most Americans and Europeans think of Africa (Adebayo, 2014; Adekoya, 2015).
Udoh (2015) defined insecurity as the state of being subject to danger or injury. Moreover, he contended that the issue of insecurity in Nigeria is being exacerbated by the fact that it is a highly multi-ethnic, multi-religious and multi-tribal society consisting of over 200 different ethnic groups which strive for individual interests. However, it is very important to ponder on some relevant research questions to fully understand the issues prevalent in the sub-Sahara African country.
Who are the chief architects of insecurity in Nigeria?
Are the issues of insecurity in Nigeria Eurocentric?
What are the implications of insecurity in Nigeria?
Udoh (2015) highlighted many causes of insecurity in Nigeria. The causes highlighted include proliferation of arms and ammunitions, illegal armed groups such as the MASSOB, Niger Delta Militants, Oodua People Congress and Bakasi Boy; oil bunkering, labour activists, kidnapping, militancy, religious fanaticism and extremism, unemployment, fear and distrust of the government, wrong political ambition, ethnic violence and so forth. However, corruption is a significant aspect behind all these aforementioned causes. In fact, it can be said that the corruption in Nigeria is endemic because it cuts across virtually every aspect of life in the country and its citizens.
Noticeably, Boko Haram terrorism is not the only issue of insecurity in Nigeria because countless numbers of other insecurity cases have taken place in the past. In the pre-colonial time, the various tribes which came together to form the Nigerian nation were living in harmony (Nigeria, 2009). The imperative question is this: is Nigeria’s problem related to its colonization by the British? Many scholars would affirm this as truth emphatically. In fact, Nigeria has become intensively Eurocentric since its colonization by the British. As a matter of fact, the Eurocentricism has robbed the nation a great deal of its culture as the people of Nigeria gladly threw away their precious values to hold on to the ‘White Man’s’ cultures and traditions. Obviously, this does not define the problem at hand, but it does define the root and causes of the problem (Nigeria, 2009). Moreover, the discovery of oil also brought a new phase to the country. Jike (2004) expressed the immensity of the gross misappropriation of resources and funds obtained from the sales of crude oil since it was discovered in Oloibiri in 1958. In fact, the living conditions of the people which were expected to improve owing to the discovery declined drastically. This marked the beginning or perhaps an offset of an unimaginable and non-sporadic corruption that plagued the country and its people till date. It is no doubt that Nigeria is a highly blessed with natural resources. However, corruption and its consequences including insecurity have made the country far backward than most countries which do not have such wealth of resources.
Implications of the Nigeria’s Insecurity
Obi (2015) reported a number of implications that ensue as a result of the insecurity issues in Nigeria. In the study, data was sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin, Newspapers and related journal on security issues spanning from 1990 to 2012. The result of the analysis of data indicated that terrorism and insecurity has a negative effect on economic development. Obviously, the Nigerian government has diverted a lot of resources that could have been used for development purposes to security votes. Of course, these expenditures have gone a long way in helping to reduce the negative effects of terrorism and insecurity, but they leave a big hole in the national purse of the country. No doubt, the security issue in Nigeria is one of the reasons for the low foreign investments in the country. Nigeria has been enlisted and known as one of the top terrorist countries of the world (Obi, 2015), a huge disadvantage to the country as per its foreign dealings. Obviously, the new administration in Nigeria is doing a lot to contain the security issues in the country, but a lot still have to be done. As Obi (2015) recommended, the Nigerian government should declare war on terrorism in every form and also seek assistance and advice from international communities who have faced such kind of challenge in the past and were able to tackle them. Moreover, the military should be empowered and encouraged to face the opposition as much as possible.
Financial Insecurity in Nigeria
Nigeria does not only face insecurity of lives but also it faces financial insecurity. In fact, the rate of financial insecurity and inflation in the country is truly alarming, and it continues to grow as evident in the devaluation of the Naira. The fall of the Naira is no longer news as it has made headlines not only in the country's national news but also in the international news. In fact, Naira has fallen beyond the figure projected by experts, and it continues to fall. In the face of the teeming insecurity, corruption and lots of other problems faced by the country, the devaluation of naira and financial insecurity in the country make life quite unbearable and difficult for the local populace. According to Anaeto & Babajide (2016), Naira reached the lowest level in 43 years at the rate of 305 against the dollar in January 2016, but sadly, the currency continues to plummet. Doya (2016) recorded that the inflation rate went up to 9.6 percent in January due to rising food cost and the value of Naira reached an all-time low of 340 against the dollar at the beginning of March 2016. Furthermore, Doya (2016) pointed out that the correlation made by the central bank between naira and inflation has already been broken down, and inflation will average double digits above the central bank's target of 6 to 9 percent within the year. Of course, it is imperative to consider some relevant research questions here with respect to the devaluation of the currency.
What factors are responsible for the devaluation of the Naira and financial insecurity in Nigeria?
What are the economic impacts of this issue to Nigeria and the world at large?
Reasons for the Currency Depreciation
The corruption appears to be the root of every problem in Nigeria as pointed out above. Lots of scholars argue that corruption is the major cause of the currency devaluation and financial insecurity in Nigeria. Of course, the currency devaluation in Nigeria is obviously because of the country’s overreliance on crude oil as pointed out by Jike (2004). Ejiofor ((2015) pointed out that one of the reasons for depreciation of the value of the currency is the dwindling demand for crude oil of Nigeria in the international market. As a result of this, the Nigerian National Petroleum Corporation had to decrease the price of the crude oils to the lowest level in more than a decade. The country, known for their export of oil palm few decades ago became heavily over-reliant on crude oil. This comes as no surprise that the reduction in crude oil price boomeranged in Nigeria's economy with remarkable impact. In fact, there seems to be an ardent addiction to free oil money by Nigerian, especially the top ruling class (Jike, 2004). Another reason for the fall of Naira is the increasing deficit between the growing demands for foreign currency along with the foreign exchange available for sale (Ejiofor, 2015). Eventually, this is expected because, over the years, the country has relied heavily on import with little or no contribution to export. Of course, the Central Bank has done its best to maintain its official exchange at a low figure, but there is further tendency of the shortfall.
Moreover, JP Morgan has threatened the country to remove it from its Government Bond Index (Abbreviated as GBI-EM) by the end of 2015 unless the Central Bank removes its strict measures regarding outflow of foreign currency. Consequently, it maintained the sustainability of foreign exchange market to an extent and thereby keeping the rate of the currency afloat. Moreover, the tighter regulation of the Central Bank does not really do any good to the country with its desperate economic situation because it causes an outflow of foreign investment.
Impact of the depreciation and Financial Instability
Currency devaluation can be termed a deliberate downward adjustment in the official exchange rate established by a government against the specific standard (in this case the dollar). In other words, the essence of currency devaluation is to stimulate export and lower (discourage) import. The central goal of currency devaluation is to achieve balanced growth in the economy while alleviating poverty. Obviously, in the light of the current issue in Nigeria, these goals are far from being achieved. Nigeria is a country heavily reliant on import. Vanguard (2015) pointed out that in late 2015 when the devaluation has not soured so high, it had already started making it hard for the average person to buy milk. In the press conference at Peru, Nigerian reporters Antoinette Sayeh, the International Monetary Fund’s Africa Director to name one country on the globe that export crude and still imports refined products and would import potentially anything that could be produced locally. As a matter of fact, although currency devaluation is intended for the good of the country and its citizen, it is rather inappropriate in the case of Nigeria. This is simply because the government has not equipped the SME to produce locally and in fact, the cost of producing locally in Nigeria is much more than importation. This makes the country still over-reliant on importation irrespective of the devaluation (Nairaproject, n.d). In addition, Idowu (2016) stressed on the increasing strength of the naira in the parallel market in February 2016 as it rose to 367 to the dollar. The naira had plummeted to 398 to the dollar earlier and staggers within this point.
Recommendations
Obviously, the Nigeria’s government has lots to do to deal with the issues at hand and turn the tides in Nigeria. Insecurity (whether financial or otherwise) is a serious issue in Nigeria and it affects every aspect of the country. Corruption has been identified as the influential cause of these maladies, and it is the responsibility of the government to fight corruption from its root. It is not enough to grant amnesties in order to appease the crime perpetrators and stop terrorism; the government must do everything it takes to root out the problem.
However, the government cannot be blamed for every negative thing in Nigeria; the citizens have a lot also to do to alleviate the economic and security challenges in Nigeria. For instance, the rise of Boko Haram in the north-eastern part of the country was really successful because the group, which was thought to seek the interest of the locals, was encouraged by the local people and over the years, it has degenerated to a heinous association that harms not only the folks but also the entire nation at large. Nigeria is blessed with lots of natural resources, and these natural resources can be harnessed towards the better good of the country and its people and even the world as a whole. However, mismanagement of the system is not only putting a strain on the country but also having an adverse impact on the entire global economy.
Conclusion
The issues of concerns in Nigeria are essentially Eurocentric. These challenges crisscross every aspect of the country and particularly it affects the economy and security. Nigeria has been enlisted among the top terrorist countries in the world because of the recent brouhaha and issues of Boko Haram as well as other terrorist incidence in the country. Moreover, economic insecurity and the devaluation of the currency is also another big issue in the country. Devaluation which is supposed to encourage export and discourage import is doing the exact opposite in the country because the government has not done what it is supposed to do in order to encourage export in the country. This affects not only the nation and its people but also the international community. The ball falls on both the government and the local people to turn the tide in the country.
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