By Timothy Samuel
The benefits of a weak naira”The Ethiopian birr, Nigerian naira, and Sundanese pound were among the worst (performing currencies) in the (African) region by August 2024,” according to the meddling World Bank, which also stated that “the naira continued to lose value, with a year-to-date depreciation of about 43 per cent as of end-August.”
The World Bank’s opposite report, which states that the Kenyan shilling strengthened by more than 21% during the same time period, contradicts banker Chika Mbonu’s admission that the naira became weaker than the currencies of many African nations.
Three African currencies—the naira of Nigeria, the kwacha of Zambia, and the kwanza of Angola—are listed by Bloomberg as being among the ten weakest in the world. Inflationary pressures, a lack of dollar liquidity, and fluctuating commodity prices are blamed for their weakness, which allows Euro-American metropolitan economies to take advantage of Third World economies.
However, if President Bola Tinubu’s economic managers can turn things around and capitalize on economies of large-scale production by encouraging the real sector in particular to produce goods for export that Nigeria has a comparative advantage in, the weak naira need not be a disadvantage. Dr. Nnaemeka Obiaraeri, an investment banker, claims that Nigeria lacks productivity but does not have a currency issue.In order to sustain the weak regime and enable it to earn even more convertible currency to finance imports and the acquisition of additional industrial and infrastructure production capacity, the Naira should be further devalued once it gains strength from the accumulated foreign reserve.
However, the goal of this strategy is not just to strengthen the naira; it also aims to reverse the Nigerian economy’s current import-oriented trend and access the ready market for Nigerian goods in wealthier nations.
Nigeria’s macroeconomic, monetary, and fiscal policymakers ought to take advantage of this unconventional chance to boost the country’s economy, which is being harmed by unsuitable policies imposed on a gullible political class by Breton Woods institutions.Consumers from other nations prefer to purchase goods from economies with comparatively weaker currencies than their own, even if they are not economists. The two largest economies in the world, China and America, are experts at this extremely lucrative game.
Encouraging the export of petroleum products from Dangote, Nigeria National Petroleum Company Limited, and other refineries to nations with stronger currencies than the naira is a clear “low-hanging fruit” place to start taking advantage of the tanking naira.
The devaluation of the naira still makes it relatively profitable to smuggle Nigerian gasoline and other petroleum products into West and Central African nations, even after the subsidy has been eliminated. Nigeria should use this ready market to its advantage and spend theN132 trillion .
At the World Bank and International Monetary Fund-hosted Group of 20 Economies meeting in Washington, DC, Wale Edun, Minister of Finance and Coordinating Minister of the Economy, accompanied Central Bank of Nigeria Governor Yemi Cardoso. Edun made the rather simplistic argument that increasing petroleum production is all Nigeria needs to do to strengthen its currency.
That is accurate, but it is insufficient for an economy that can enhance the value of basic commodities. It merely satisfies the worries of foreign investors who want to know how simple it is to send their profits home. For this reason, CBN’s Deputy Governor for Economic Policies, Muhammad Sani Abdullahi, boastfully revealed that “Nigeria now has $40.2 billion external reserve.”
The productive potential of Nigeria’s economy is overlooked by Abdullahi, who boasts that increasing foreign reserves is “a significant move, up from a year ago when (Nigeria had) less than $34 billion… to cover at least 14.3 months of import for goods and services, and 15 months for goods only.”
