“A weak currency is the sign of a weak economy, and a weak economy leads to a weak nation,” – Ross Perot
Apart from foodstuffs and essential commodities that are now beyond the reach of the poor, there is another devastating news that Nigeria is also experiencing an inflation of its currency notes, the naira. In other words, just as prices of goods and services continue to rise, so is the naira. The naira is now a bad economic friend to the less privileged but the best friend to the highly privileged. Only last week, it was at N920 to a dollar.
Currency devaluation is not new to Nigeria. We still remember the introduction of the infamous Structural Adjustment Programme (SAP) of former military ruler General Ibrahim Babangida. The economic policy with naira depreciation at the core point could not get Nigeria out of economic doom. In fact, the late renowned economist Professor Sam Aluko lamented that the real adverse effects of SAP would not be felt until after 10 years. Well, it is now almost four decades after that prophesy. Nigeria is still battling with economic diseases and this reality ought to be recognised by our present leaders with a view to learning great lessons. May the ghost of SAP not continue chasing us!
Another significant lesson is that currency devaluation did not yield the desired results in some countries. In the history of currency devaluation, nine countries had to replace their currencies because they lost their purchasing power to the barest minimum. Such countries included Wiemar Republic, Hungary, Chile, Argentina, Angola, and Zimbabwe, among others. In fact, the currency depreciation of the Weimar Republic was so terrible between 1921 and 1923 that it caused considerably internal political instability as well as misery for the general populace.
From available indices, the naira is going to the obituary room. It is persistently debauched of its high esteemed value. The continuous devaluation is creating more economic troubles than solving them. At least, this is what the common man can understand. When the government fixes the naira at a very low value, it feels contented that it has its own genuine reasons for its action. For President Bola Ahmed Tinubu, he is putting across the message of what he calls economic reforms.
But how did his predecessor, Muhammadu Buhari fare in this trajectory? Is naira depreciation our only means of survival or our promoter of hardships? Nigeria has been on record as a mismanaged nation. Therefore, devaluation should not be the first panacea but should come last even if it is necessary. Is it a misplaced priority that it is easy for the government to devalue the naira instead of launching missile attacks against agents of corruption? I believe that a corruption-free nation is the best way to strengthen our battered economy.
There is no economic reforms without its own pains. However, the endurance of the pains have to be justifiable and all inclusive. We cannot expect an economic miracle when only one and largest segment of the society bear the hardships while the other minor segment does not feel any brunt. Our economic system is mainly capitalist in form and practice. Capitalism has three evils to present to any society. But the most famous evil of capitalism is INEQUALITY.
When the evil of naira devaluation strives in our environment, inequality can be seen everywhere. In other words, the evil of capitalism as in inequality is connected with naira devaluation. This has pushed the masses raise their voice of anguish but cannot be heeded by their leaders who assume too much air that they know what is best for them.
The prominent argument is that devaluation leads to competitiveness of domestic goods in foreign markets, making foreign goods less competitive in domestic markets by becoming more expensive. However, the irony is that Nigeria is not producing enough for both local consumption and export. For instance, the manufacturing sector has been dwindling for a long time. And 80% of workers are employed in sectors with low levels of productivity.
While it is argued that weakening of the naira may boost export, the agriculture sector is not promising that 50 % of farming activities have declined as a result of incessant banditry and insurgency. Therefore, government must go back to the drawing board to critically assess the complex situation.
As Nigeria has a dual exchange regime dominated by a tightly-controlled official exchange rate and a parallel market, where the currency is freely traded, it is pertinent to mention that in 2022, naira depreciation added N9 trillion to foreign debt burden. But for states and state governors, devaluation will mean more money to share at FAAC meetings, especially to pay the new minimum wage if and when approved. This is another paradox of naira devaluation.
Dudley Seer was a British/New Zealand economist specialised in development economics. He stated that the objectives of development for developing countries include family incomes should be adequate to provide basics of life. Jobs should be available to all family heads because job is something without which personality cannot be developed. Access to education should be increased and literary ratios raised.
In relation to naira devaluation, all these objectives cannot be attained. This leads to another economic issue coined by Dudley Seer. In his 1969 publication, ‘What is development?, he suggested that real development is when a country experiences a reduction or elimination of poverty, inequality and unemployment. Can naira depreciation reduce or eliminate these predicaments?
The fact remains that our devaluation of the naira is supporting the argument that the US dollar is a powerhouse that overpowers the world’s currencies. The dollar is now a world of itself, an extension of the US economic colonisation. That is why the dollar is popularly regarded as the king in global trade for decades. It is because of this that more and more countries are agitating for trade to be carried out in other currencies besides the US dollar. Will this be a waiting reality?
In a nutshell, naira devaluation is currency inflation. While commodities are purchased with the naira, the naira is now also a commodity purchased with a skyrocketing price. Like a motion picture, we are viewing the assassination of the naira by the dollar.
Abdullahi writes from Ringim, Jigawa state via aaringim66@gmail.com