19/06/2021
Economists get in here.
Today, 19th June, as always, IMF advised the Nigerian government to devalue the Naira again.
As a business person who is into importation, I spend hours daily observing the exchange rates and the currency movement in the parallel market.
Because we are an import-dependent country, the last devaluation of the Naira from 379 to 412 per dollar caused a significant increase in the prices of commodities around the country.
Even though a lot of the prices of the goods that I imported before the devaluation have not had many significant changes from the suppliers, the prices increased all the same due to the higher exchange rate, cost of clearing, and shipping which are both dependent on the Dollar.
I still don't understand the logic behind the incessant devaluation of the Naira by the CBN.
In my understanding, a country may choose to devalue its currency if there is a lot of manufacturing going on, thus devalues its currency to make the prices of the manufactured goods cheaper for exports. That's exactly what China is doing.
But in the case of Nigeria, it's reverse. Devaluing the Naira will make imports more expensive. Because we are import-dependent, this means more hardship and inflation.
My concern:
Before 1985, the Naira was equal to the pound sterling and stronger than the US Dollar. 1USD was 0.765kobo in 1984. Then in 1985, the world bank and IMF introduced the structural adjustment program to Nigeria and other African countries asking them to devalue their currencies to able to access loans.
That same year was the first time the US Dollar had more value than the Naira. From 1985 until today, the Naira has been going on a downward spiral. Again, in 2021, the IMF is still asking Nigeria to further devalue its currency.
Why is IMF bent on always giving this type of advice? What are the benefits of Naira devaluation to Nigerians? I still don't understand. Economic experts should help me out.
