Over the weekend, I stumbled on a news piece titled Naira may be devalued again – Report. While I belong to the school of thought that devaluation of a country’s currency is not necessarily a bad policy, the timing of this macro-economic tool has to be a key consideration in its implementation. Although, I must state here that nothing in the aforementioned article points in the direction of the contents being the position of the new administration, a news item backed by a report from Renaissance Capital cannot be wished away as a mere conjecture. The article (and in a larger context, the report) stated that the “All Progressives Congress comes in with a macro policy that requires a much weaker naira, i.e. an export-led growth policy”

The newly installed APC-led Federal Government had committed, in one of its numerous campaign promises, that the current valuation of the Naira against the US Dollar (and in essence, other foreign currencies) is unacceptable. I’m sure this statement by President Buhari during his campaign cannot be interpreted to mean anything other than the fact that his administration (if voted in, which has now come to be) is committed to a regime of exchange rate stability or appreciation of the Naira against other basket of currencies.

On a personal note, I will not hold brief for the Buhari-led government to achieve a stable exchange rate over the next four years because of the touchy relationship between oil prices, reserves accretion and the value of the Naira. In a more in-depth explanation, a growing economy like Nigeria’s with huge level of imports (growing imports) has to deplete its reserves (sell more dollars into the system on a net basis) to keep exchange rate stable if oil prices are held constant (rate of dollar supply to foreign reserves remain unchanged). Of course, if oil prices improve over the next four years, the dynamics of the analysis made earlier is distorted but industry experts are not expecting to see crude oil back to US$80/bbl. any time soon.

Read more here:

Devaluation: A Poisoned Chalice?

cc: Lalastica
: barcanista

Could you help put this on FP please?