Nigeria’s Reckless Devaluation of the Naira

 Devaluation is an official lowering of a country’s currency within a fixed exchange rate system. In which a monitory authority formally sets a lower exchange rate of the national currency in relation to a foreign reference currency or currency basket [1]

In 1972 $1 (one dollar) was equal to ₦0.66 (zero point six, six naira) [2]. This was one of the times when the Nigerian currency was strongest against the dollar. Things have drastically changed since then to a situation where in 2023 the current exchange rate is $1 (one dollar) to ₦768 (seven hundred and sixty eight naira). Fifty one years might seem like a sufficient amount of time for the change in the currency exchange rate, however between august 2013 to august 2023, a space of 10 years the naira has dropped by 376% (three hundred and seventy six percent) and this change in the currency exchange rate can be attributed majorly to the naira devaluation.

There are certain advantages to devaluation such as, to reduce sovereign debt burdens, to shrink trade deficits, to boosts exports etc. [3] but none of these have been a long term effect of the Nigerian currency devaluation, instead this has led to international investors quickly losing faith in the currency, foreign travel and buying of foreign goods becoming expensive due to the fall in currency value, demand pull inflation where prices in the domestic economy rises due to rise in demand because imports are now expensive, locally owned companies and individuals with foreign debt losing money, in short the disadvantageous effects have vastly out-weight the fancifully expected advantages of the naira devaluation.  

The reckless devaluation instead of trying other alternative means to stabilize the currency and economy has led to a huge reduction of the worth of the naira internationally and a wider gab between the rich and poor of Nigeria. Within the last ten years there are other financial tools/policies the government could’ve used to stabilize the currency or/and economy but instead they took the path of reckless devaluation at every turn, with no regard for the long term effect on the people and the economy.

The long term effects of the devaluation has been disastrous to say the least, if nothing else the mere fact that the currency dropped by an astounding 375% is a huge red flag that any monitory authority national or international should be immensely perturbed by. It would seem that the Nigerian government is not bothered by the effects of the frequent devaluation it continually utilizes recklessly.

We implore the aid of international financial governing bodies like the World Bank, IMF etc. and new media outlets like CNN, BBC, CBS etc. to help look into and publicize this, so the world is aware of what’s going on.

References

[1]

Wikipedia, "Devaluation," Wikimedia Foundation, 29 November 2022. [Online]. Available: https://en.wikipedia.org/wiki/Devaluation#cite_note-Todd-4. [Accessed 22 08 2023].

[2]

Wikipedia, "Nigerian Naira," Wikipedia Foundation, 08 22 2023. [Online]. Available: https://en.wikipedia.org/wiki/Nigerian_naira. [Accessed 22 08 2023].

[3]

A. Hayes, "Three Reasons Why Countires Devalue Their Currency," Investopedia, 08 06 2023. [Online]. Available: https://www.investopedia.com/articles/investing/090215/3-reasons-why-countries-devalue-their-currency.asp. [Accessed 22 08 2023].

 

Comments

Post a Comment

Popular posts from this blog

No Taxes and Earning In Foreign Currency, The Double Advantage Of The Hidden Nigerian Worker

Image
  Tax is the most common and important government intervention to redistribute income among the population. It is an attempt to share the burden of economic growth through a progressive taxation system. The tax burden on the upper income groups is higher, and the burden is lower for lower income groups. There are many benefits of paying taxes. They help in the development and maintenance of infrastructure, like roads, and they can even help to create or maintain the institutions needed for the rule of law and the functioning of the democratic process. Taxes are the government's revenue for financing public spending, including building roads, school buildings, and hospitals, and for funding local government services, including police and fire departments, parks and playgrounds, and public libraries. [1]  So it can be a big issue when taxes for one reason or the other are not being paid as they should be. This is the case for the Hidden Nigerian Worker earning his wages in forei...
Read more

Has The Naira Devaluation Returned?

Image
For the last few months the the Nigerian currency (i.e Naira) has been gradually gaining value against one of the strongest currencies in the world and the universal medium of international transaction, which is the USA dollar but it was not always so.  The year 2004 began with one ($1) dollar equal to about one thousand four hundred (#1400) Naira. Although there was no substantial justification for this and it was evident that it was a manipulative move by the bank owners and their bureau de change partners to exploit loop holes in the financial policy of the country to line their pockets, the devaluation of the Naira steadily continued until one ($1) dollar was equivalent to  one thousand eight hindered (#1800) Naira. This was when the Nigerian government finally took a stand, publicly pronounced this as a gross injustice to the Nigerian citizens feeling the brunt of the intense devaluation and took economic steps to restore the Naira to the actual value. The move by the Nig...
Read more