Naira Devaluation Or Doom: Is Nigeria’s Economic History Repeating Itself?
- Skid
- Feb 29, 2016
- 1 min read
On the 20th of February 2016, Nigeria’s President Buhari hardened his stance against devaluing the Nigerian Naira because he believes devaluation will not help the country “as it had few exports apart from oil and depended on imports whose cost would rise with such a move.” This view is shared by Governor Emefiele of the Central Bank of Nigeria (CBN), who noted on 17th November 2015 “Our major export commodity which accounts for more than 80% of our income is crude oil…and what is supposed to be the non oil export, we are not producing effectively.” CBN governor, Emefiele, also warned that that naira devaluation would lead to hyperinflation.
According to the famous quote from the philosopher George Santayana, “those who ignore history are doomed to repeat it.” Thirty years ago in 1986, Nigeria’s policy makers made the exact same argument against devaluing the naira under extreme pressure from a similar oil price collapse. The powers at the time said: “Oil is dollar-denominated and virtually our only export. What purpose then would be served by an exchange rate adjustment?”
This argument is incomplete and ignores many important issues: the credibility of macroeconomic policy; subsidies for the rich hidden in the overvalued exchange rate; and the constraints placed on pricing and production by new restrictions pushed by policy makers hoping to regulate their way out of the current currency crisis.
Vanguard- http://www.vanguardngr.com/…/naira-devaluation-doom-nigeri…/
