10 Reasons for Dollar Shortage in Nigeria

Dollar shortage in Nigeria is the main reason why the dollar to naira exchange rate is growing higher every day. This article will focus on the reason there has been dollar scarcity in Nigeria in the past years. If you have been searching for information regarding dollar shortage in Nigeria, this post will give you full information about this. Information Guide Nigeria

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How important is the dollar to the Nigerian economy?

The United States dollar is the most important foreign currency in the Nigerian economy. This is because Nigerian importers make use of U.S. dollars to import goods from other countries into Nigeria. Nigeria, being a country that imports more than it exports tends to make more use of the dollar even more than its local currency.

Another thing that makes the dollar so important to the Nigerian economy is the fact that the country’s economy depends on oil as its main means of generating foreign revenue, since oil is valued and purchased in dollars, it, therefore, makes dollars become a major player in the Nigerian economy.

This is why all sectors of the Nigerian economy suffer each time there is scarcity of dollars in the country. Reasons for Dollar Shortage

10 Reasons for Dollar Shortage in Nigeria

Below are the reasons why we have dollar shortage in Nigeria, most of these reasons are interconnected. Read them carefully. TOP 10 RICHEST KINGS IN NIGERIA

1. Drop in Oil Prices

It is not surprising that this is the first reason on our list, crude old accounts for 85% of the nation’s import revenue and 55% of government revenue. Since crude oil is priced and purchased in dollars all over the world and Nigeria is solely relying on oil to earn dollars, the dollar becomes very important. What this means is; higher price of oil equals more dollars, lower price of oil per barrel equals to less dollars. Top 50 Websites in Nigeria According to Alexa

2. Importation

Another major reason for the shortage of United States dollar in Nigeria is the high level of importation in the country. The fact that Nigeria imports more than it exports means that more dollars are sent out than what is coming into the country. Over $50 billion worth of goods were imported as of 2019. Nigerian importers constantly use dollars to pay for these goods and also pay for the shipping and clearing. This constantly sends dollar out of the country which is more than the dollars that are coming into the country. Npower recruitment

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3. Numerous Medical Trips to Overseas by Nigerians

This is one of the reasons that dollars reduce in Nigeria. You will agree that lots of Nigerian elites prefer going overseas for medical treatment rather than receiving the treatment in Nigeria. As they keep embarking on these trips, they need dollars to pay for flights, finance their stay and also pay for the medical bill. While this further weakens the value of the Naira, it also contributes to the shortage of the United States dollar in the country.

4. Thousands of Nigerians Studying Overseas

This is another reason we have dollar shortage in the country. A lot of Nigerian parents are sending their children to colleges and universities overseas. They need the U.S. dollar to pay for tuition fees, feeding, and accommodation for their children. Each time they want to send money to their children, they need to sell naira and buy dollars to be able to send to them, this further depreciates the value of naira and makes the dollar stronger. It also increases the demand for the dollar thereby causing its shortage in the country. dollar to naira rate

5. Lack of Foreign Investments in Nigeria

Lack of foreign investments in the country has reduced the amount of United States dollars coming into the country. When investors go into any country to invest, they are possibly going with dollars because it is the global currency, this increases the availability of dollars in that country. This is not the case in the Nigerian economy.  Corruption and insecurity have scared away foreign investors from coming into the country to invest. WAEC result

As long as we are not having different means whereby dollars come into the country and we keep spending more dollars on importation, there is bound to be shortage of dollars.

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6. Money Laundering

Although many economists do not like talking about this, it is one of the factors that have contributed to the shortage of the United States dollars in the Nigerian economy. Many Nigerian politicians launder money to other countries, these money are mostly taken out in dollars because naira is a nonconvertible currency and won’t be accepted in other countries.

This is why these politicians change the naira to dollars to be able to take them to any part of the world, this contributes to the shortage of dollars in Nigeria. JAMB form

7. Nigerians preference of dollar over naira

Several Nigerian investors and business owners are gradually dollarizing their investments and assets. They are selling off their naira investments to buy dollars because of the fragile nature of the Nigerian economy and the instability of the Nigerian currency. This has led to more demand for dollars which has increased its worth and caused dollar shortage in the country.

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8. Low Exports

Nigeria is experiencing shortage of the United States dollar because the number of exports is lower than imports.  The higher the number of goods and services exported overseas, the more dollars we will have in the country. But when the situation is a complete reverse, there is dollar scarcity because importation has continued to remain high. Pounds to Naira

9. Stashing dollars at foreign reserve

You may be surprised that we have listed this as one of the factors that cause shortage of dollars in Nigeria. Well, here is the thing, the Central Bank of Nigeria constantly hunts for more dollars to store at the foreign reserve. The CBN needs more dollars to be able to manipulate the market and try stabilizing the exchange rate of the country’s currency. This is a serious reason why the dollar becomes scarce sometimes. In order to keep the exchange rate stable, the CBN needs more dollars in the bank. You can now see that the CBN is hunting for dollars just like Nigerian exporters are hunting for it.

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10. Nigerians preferring foreign imported products to local products

This is why there is a low demand for locally made products while the demand for foreign products has continued to rise. As long as consumers prefer the imported goods, Nigerian companies will not be encouraged to market locally made products, they will look at importing the foreign ones and this means they need dollars to purchase them. This automatically contributes to the shortage of dollar in the country. JAMB Result

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