Naira Devaluation- What I Think

Fashion home!
 
I slept off listening the Presidential Media Chat of some days back. However, I was privileged to hear him answer a few questions regarding devaluation of naira and one important question he asked in return was “what are we devaluing against”? 


The British dictionary defines devaluation as a decrease in the exchange value of a currency against gold or other currencies, brought about by a government. It is pertinent for us to note that devaluation comes in two ways; an intentional and planned policy or by reaction to market events (unplanned). Going by these, I think Nigeria already found herself in the second category of reacting to market events. The country’s currency value has continually dropped which obviously is not as a result of any plan or intention by the government. It has been as a result of the condition in which we have found ourselves. Something really needs to be done! We sure need to act fast! But trust me, not by further devaluing our currency. I truly don’t think that is the way forward unless there is something I am yet to understand about the policy.

I was surprised when people clamored for  further devaluation of the currency and I could not understand and still do not understand the logic it. The MD of  International Monetary Fund (IMF) , Ms. Christine Lagarde is on a 4-day visit to Nigeria to discuss on the way forward for the country's economy. I have carefully followed up to listen to all her speeches and I am yet to hear her ask Nigeria to further devalue the Naira. Going by the question our President asked during the presidential media chat, What are we devaluing against? 
 
It would have been a different case if we had goods to export and as such being technical in ensuring that these goods receive patronage. it would have also made sense if we were in full control of the economy knowing when to tweak policies to favor one sector or the other. but this is not the case at the moment and as such, won't make any sense to do that now. So many policies have been put in place of late all towards a better economy, I think we should watch how far these policies take us before deciding whether or not to bring up new ones.

2 comments

Hmmm.. I so dont agree with you here. The current position (depleted) of our foreign reserve can be half solved by foreign investors, foreign investors that have pulled out/can't invest due to the instability the state of our Naira poses. Foreign investors are a source of FX, FX we need bad bad given the CBN is so behind on settling import obligations and with the free fall of oil prices it a quick fix. foreign investor will ease the cash squeeze in the economy not to mention the dire need to develop some vital sectors/industries that will be instrumental in taking our economy to the next level eg Power sector, refineries, we cant do it on our own and we dont even need to. This is my own veiw oo, we have gained nothing since we refused to devalue.

I don't agree with the first comment.Devaluing the naira wont bring back foreign investors. A lot of factors are usually considered when trying to lure foreign investors to an economy. Devaluying the naira will further weaken this economy. Have you seen what the naira sells for a dollar today? and you still talk of devaluing. It is opportunity cost playing out; I think. We have to lose some things in order to get this economy up and running and if losing foreign investors temporarily will be one of the cost, then I think it should be. Mind you, these investors are not dumb, as soon as they see the direction the country is taking, they will still come back and have no option but to re-invest. Enough of these foreigners dictating to us; it is time we take a stand and stand by it.


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