DEVALUATION OF NAIRA: IMPLICATIONS ON THE NIGERIAN ECONOMY

Introduction

            The Nigerian economy happens to be one of the largest in Africa, but in recent times it has been faced with an unsteady flow of revenue which has caused the government to depend on borrowings from international sources. Devaluation is an official reduction of the value of a domestic currency in relation to the value of a foreign currency, particularly those currencies accepted internationally for transactions. Devaluation, in other words, refers to a deliberate action of the monetary authority, like the Central Bank of Nigeria, CBN.

             Over time, the devaluated currency appreciates and economic conditions improve. But even with the devaluation of the Nigeria currency, can we say it has produced the needed result? In May 2021, the CBN devalued the Naira, and the black market price of a dollar increased from around N360 to N450. If some countries devalue their currency, it is to serve debts and reduce debt burdens.

The depreciation of the Naira has done more harm than good to the Nigerian economy.

Due to the high rate of foreign exchange, Nigeria's economy is heavily reliant on imports, as we import virtually everything related to goods and services. Importation has become prohibitively expensive, thereby affecting local prices. As a developing country that relies on raw material exports, our economy is bearing the brunt of the naira depreciation, which has increased the cost of basic goods and food. Unemployment, high exchange rate, and inflation are the effects of this devaluation on the Nigerian economy.

 Conclusion

Considering the rate at which the Federal Government is seeking more loans, the Nigerian currency may not appreciate as quickly as the CBN projected because there are numerous debts to be serviced. The depreciation of the naira has been a significant burden on the operations of many businesses and individuals. Further Naira depreciation or bad CBN policy will have a huge negative impact on the economy, as inflation will rise, exchange rate inequality will increase, and unemployment will rise.

NAME: ABURU DISER 

STATE CODE: OS/22C/2122