Floating the Naira: A Risky Gamble, Says Africhange CEO Ajala

Africhange CEO Tope Ajala has raised concerns over the floating of the naira, describing it as a high-risk strategy that could have far-reaching economic consequences for Nigeria. Speaking at a recent financial forum, Ajala emphasized that while the move is aimed at aligning the naira with market realities, its implementation comes with significant risks that require careful management to avoid destabilizing the economy further.

Floating the naira, a policy introduced earlier this year, allows the currency’s value to be determined by market forces rather than being pegged at a fixed exchange rate. Proponents argue that this approach attracts foreign investment, reduces black market activities, and creates a transparent foreign exchange system. However, Ajala warns that the naira’s depreciation in the short term could exacerbate existing economic challenges, including inflation, unemployment, and declining purchasing power.

“The decision to float the naira is bold but extremely risky, particularly in a fragile economic environment like Nigeria’s,” Ajala stated. “The market-driven exchange rate exposes the currency to volatile fluctuations, and without adequate safeguards, the policy could deepen economic hardship for millions of Nigerians.”

Ajala highlighted that Nigeria’s overreliance on imports makes the economy vulnerable to currency depreciation. A weaker naira raises the cost of imported goods and services, driving inflation and increasing the financial burden on households. This is particularly concerning given that inflation in Nigeria has already reached record levels, affecting the prices of basic necessities such as food and fuel.

The Africhange CEO also pointed to the potential impact on businesses. Many Nigerian companies rely on imported raw materials and equipment, meaning rising costs could erode profit margins and force some firms to scale down operations or lay off workers. Ajala warned that these ripple effects could stall economic growth and worsen unemployment rates, which are already alarmingly high.

Additionally, Ajala expressed doubts about the Central Bank of Nigeria’s (CBN) readiness to manage the implications of a fully floated currency. He urged policymakers to implement measures to cushion the impact of the policy, such as strengthening foreign reserves, curbing inflation, and stabilizing the exchange rate through targeted interventions.

One of the critical challenges of the floating policy, according to Ajala, is the lack of sufficient foreign exchange inflows to support the naira. “For a floating system to work effectively, you need strong forex inflows from exports, foreign investments, or diaspora remittances. Unfortunately, Nigeria’s dependency on crude oil exports, coupled with declining production, has left the country in a vulnerable position,” he explained.

Ajala also advocated for broader economic reforms to complement the floating of the naira. He stressed the need to diversify the economy by boosting non-oil exports, improving infrastructure, and creating a business-friendly environment to attract foreign investors. Without these structural changes, he cautioned that the naira’s floating might yield little long-term benefit.

Despite the risks, Ajala acknowledged that the policy could offer opportunities if managed properly. A freely floating naira could enhance transparency in the forex market, reduce arbitrage, and encourage diaspora Nigerians to send remittances through official channels, potentially increasing foreign exchange liquidity.

However, he reiterated that the success of the policy hinges on effective implementation and complementary economic measures. “This is a gamble that can pay off, but it requires discipline, strategic planning, and consistent policy execution. Without these, the floating of the naira could plunge Nigeria into deeper economic challenges,” Ajala concluded.

As the naira continues to navigate turbulent waters, Ajala’s cautionary stance serves as a reminder of the delicate balance policymakers must maintain to ensure the move strengthens rather than weakens Nigeria’s economic stability.