Still on devaluation of the naira

SINCE I wrote a piece last week, “To de­value or not to devalue Naira,” express­ing that the devaluation of Naira would be a bad economic policy for the nation, there have been unanimous and favor­able reactions supporting the position of the federal government under President Muhammadu Buhari to continue to reject the devaluation of Naira. It seemed that every Nigerian who has an elementary knowledge of the impact of devaluation detest the idea of the policy. A mere sug­gestion of it irritates very many Nigeri­ans.
But before I share the reactions, it is pertinent to note that Naira had been pre­cipitously falling in value against dollar prompting speculations in many quarters that Naira may eventually hit N600 to $1. Some people even gave a grim predic­tion that one dollar may be exchanged for one thousand naira in the near future if the federal government did not come up with a strong and practical economic policy to improve the general economy.
However, late last week, the bleeding seemed to have stopped, at least temporar­ily. In the past few days, starting late last week, Naira recovered a little bit of its value. Even at that, many people are still doubtful of the currency’s full recovery.
Nevertheless, today, Naira is worth more than its value early last week. This is an in­dication of the fact that devaluation is not the panacea to Nigeria’s balance of pay­ments woes. Regardless of the currency’s sporadic fluctuations in value, with proper fiscal discipline and targeted diversifica­tion policy, the country will fully recover from its economic malaise without devalu­ing its currency. Many countries and other experts will continue to mount pressure on Nigeria to devalue Naira because it will be to their advantage.
President Buhari should continue to resist such pressures. Any attempt to de­value Naira will send the economy into a tail spin causing several economic disloca­tions that will impact the average Nigerian negatively. The economic pains the people are facing now will pale in comparison with what they will face if the currency is devalued.
The economic hardship will be severe and protracted. So the temporary pains of non-devaluation of Naira will be prefer­able to the hardship the devaluation of the currency will bring to the people due to economic stagnation, reduced purchas­ing power, high unemployment, scarcity, and high inflation
In any case, it is essentially important for the government to educate the popu­lace on what it is doing to tackle eco­nomic problems in Nigeria. The public should be in lock-step with the govern­ment to find solutions to the problem. Transparency is very critical to attracting public support. In the absence of trans­parency, people will be in the dark and will not know what the government is doing or not doing.
Here are a few of the
reactions to the story…
Dr. Prince Nwaorgu, a practicing phar­macist opined, “I’m not an economist and therefore can’t sufficiently defend any stance that I take on the devaluation of the Naira, but I can have an opinion.” He continued, “It doesn’t take an econ­omist to know that the word “devalua­tion” is bad and in this case bad for the Naira.” “But there are few times when bad is actually good, like in the case of the devaluation of the Chinese yuan; in that case, the Chinese exporters enjoyed competitive edge in the world market which consequently was great for the Chinese economy,” Nwaorgu stated.
He said, “However, this singular good thing doesn’t apply to the Nigerian econ­omy. Why? Because we don’t export anything other than the oil and the oil has already been devalued in price. Any additional devaluation of the Naira will worsen our budget which is pegged on the oil.”
“According to economists, “devalu­ation occurs in a fixed exchange rate and depreciation occurs in a floating ex­change rate.” Given that definition, we shouldn’t even as a country be consid­ering devaluation, rather embrace depre­ciation of the Naira,” Nwaorgu added.
“Besides, why should we devalue our Naira? The trillions of dollars that I read every day on the Internet that are stashed away in various banks in the West should be more than enough foreign reserve to buttress our flagging economy,” Dr. Nwaorgu concluded.
Similarly, Chief Ken Jerry Ike stated, “In a system that is working normal with problematic economy, devaluation of currency can sometimes turns things around.” “The essence of devaluation is to put more pressure on importation and less pressure on exportation,” he opined. Ike continued, “When that is done im­ported good becomes more expensive than locally produced ones; people would now begin to patronize locally made goods.” “Nigeria will now begin to earn more foreign exchange through her exports to close up her deficit,” he argued.
Chief Ike also explained, “The prob­lem I have with the devaluation of Naira is that Nigeria is more of import­ing country than exporting country and Nigeria has no trade balance with any country and as such will not benefit from the devaluation of her currency.”