Going Local: Nigerians turn to homegrown substitutes as exchange rate approaches N600/$1

Nigerians face a tough choice, keep gobbling up foreign-made goods and services or looking inwards for the closest substitute. The obvious choice is getting clearer by the day as the exchange rate at the parallel market approaches N600/$1. It closed at about N557/$1 on Tuesday and at this rate, it could climb past N600/$1 by year’s end.

Even at N450/$1 the much in demand greenback was already far above the reach of most Nigerians. Anything, goods and services, that’s linked to the dollar is almost unaffordable for anyone with a legitimate cause. Importers have run out of options and face revolting consumers who just can’t afford to buy consumables at ever-increasing prices. Most traders are looking inwards for what to sell. There has to be local products that make sense.

Manufacturers are also under pressure to find more suitable options. To compete against foreign imports they must sell cheaper even if it’s at a weaker quality. But that competitive edge is under threat, everyday they rely on foreign inputs, which sucks out more dollars that they don’t even have. To survive they too are looking inwards. Some are funding middlemen skilled at providing local raw materials and input. Others tap into their foreign networks going beyond just technical partnerships based on knowledge and intellectual property transfer to actually setting up manufacturing plants.

Real estate developers are also facing significant cost escalations. The cost of building materials has skyrocketed eating into their margins. Some face outright losses and resort to going back to those who paid off-plan to provide buffers. New developments are going through tough introspections. Quantity surveyors are working overdrive just to get the right cost to deliver profitable projects while architects are getting more creative with managing space. Developers are finding ingenious ways to best the rap. Rather than approach banks, trade by barter appears to be the plausible route. Get suppliers of iron rods or reinforcements to supply what you need for a project in exchange for a unit of your build. This is also part of looking inwards.

The travel industry is not left out. Summer holidays are out of reach for a lot of families. Vacation spots in Lagos are recording an uptick in demand as Nigerians learn to enjoy their homegrown tourism. Covid-19 may have been a factor that has propelled local tourism but it’s more on the dollar. Two years ago, when the world saw its last normal summer, $2,000 was just under N800k. Today it’s over N1m. A $10k overseas trip is now over N5 million and that might not last beyond a month without shopping. Most won’t spend up to half of that if they explored local tourism.

Nairametrics believes it’s going to get worse before it gets better. As bad as a crisis can be, it can also be the best thing that can happen to the victim. Nigeria needs to make the best of this crisis. Perhaps a national renaissance that awakens the ingenuity in everyone. A huge adjustment is in the offing and it will take many by surprise. Most people will have to change their obsession for most things foreign and adapt to local. It’s a tough choice but the logical one at the moment if Nigeria is to survive this crisis.