THE mutterings of discontent are growing louder in Nigeria’s street markets. The price of a bag of rice has surged by 12.5% in the past month. Supplies of bread have dwindled after bakers turned off their ovens to protest about the rising cost of flour. The rich lament that milk is missing from supermarket shelves. The poor complain about the price of garri (cassava flour). A fish importer estimates that 70m Nigerians can no longer afford his wares.
Such are the symptoms of Nigeria’s foreign-exchange crisis. Africa’s most populous nation exports oil and imports nearly everything else. As oil prices have collapsed, Nigeria’s foreign earnings have tumbled with them, putting huge pressure on the naira, the local currency. Yet President Muhammadu Buhari refuses to allow the naira to devalue, fretting that this would fuel inflation. Economists point out that a weaker currency would simply reflect that Nigeria is poorer now than it was when oil was above $100 a barrel. He ignores them.
Since Mr Buhari came to power in May, the central bank has kept the official exchange rate artificially strong and restricted the supply of dollars. It refuses to release any for imports of a range of goods including meat, margarine and toothpicks.
Yet Mr Buhari seems unlikely to change his mind. So senior members of his party are now pushing for some form of dual exchange rate. This would leave the naira’s official value unchanged, satisfying the president, while legitimising a parallel market that would supposedly be used for non-essential imports. In practice most currency flows would soon be made at this new market rate. This solution is far from optimal—the central bank window would be a continued source of corruption and patronage—but better than the status quo.
Without some flexibility on the currency, expect food shortages to worsen.