eritvnews: Nigerian Naira Will Continue To Depreciate Until Biafra Is Restored

Should the Naira be devalued?

worthless Naira

THE above title was the first leg of a trilogy published on the naira exchange rate between May and June 2014 in both the Punch and Vanguard Newspapers. The other titles are “Advantages of a stronger naira” (26/5/2014) and “Who is afraid of a stronger naira” (02/06/2014).

See www.lesleba.com. Evidently, the controversy surrounding appropriate naira exchange rates has been sustained over the years; nonetheless, the fundamental questions remain the same. In this week’s article, we will provide answers to some of the most frequently asked questions regarding the naira exchange rate.

“Why are some experts recommending that the naira rate of exchange be devalued?
Indeed, the suggestion that the naira is overvalued is not new, and even the management of the much celebrated, yet comatose economic empowerment and development strategy, NEEDS, had, over a decade ago, indicated N180 as the appropriate equilibrium and desirable rate of exchange for the naira. Much more recently, however, the huge untamed market demand for the dollar may have influenced the suggestion by some experts that the naira should be quickly devalued to avoid a catastrophic free fall.

Would the naira rate become stable with devaluation?

Historically, the naira has suffered multiple devaluations, which evidently, did not prevent further depreciation in the last two decades.  Consequently, another official devaluation of the naira would not necessarily induce long-term stability of the naira.

Experts have claimed that naira depreciation would increase our exports

Curiously, this argument has often been made to confuse and deceive Nigerians; interestingly, the Nigerian industrial subsector was more diversified and productive, with increasing employment opportunities when the naira exchange rate remained less than N5:$1. Amazingly, the industrial landscape has become famished, and Nigerian exports, with the exception of crude oil, have actually plummeted, as the naira fell to N160:$1.  Sadly, much cheaper imports have quickly replaced the output of our erstwhile thriving industrial subsector. There is therefore, no reason to believe that naira rate below N160:$1 would reverse this trend.

Will a weaker naira reduce inflation?

Capital no! Historically, once again, the rate of inflation remained below 5% between 1975-85, when the naira was much stronger.  In fact, a weaker exchange rate will instigate higher production cost across the board for the productive sector of the economy, and also fuel inflation.  All manufacturers, who import vital raw materials for production, have sadly suffered similar fate, with disastrous consequences for growth and employment. Nonetheless, a weaker naira will not increase the export price or demand for crude oil, which incidentally, still contributes over 70% of government revenue.

Read More At: Vanguard