₦airaland Forum

2rutalk1:
Devaluation is a DELIBERATE reduction in the value of a country's currency in relation to the currencies of other countries. Devaluation is different from depreciation. Whereas devaluation is deliberate, depreciation of currency is caused by some macroeconomic factors.

However, Devaluation is used to discourage import and encourage export of goods and services across borders.

How do we achieve this? When a country's currency is devalued, foreign goods (imports) become so expensive because the value of the country's currency has been reduced making the value of the currency of her trading partner to go up. In this case, the foreign country will be enticed to import from Nigeria (for instance) and our hitherto importers will equally buy Nigerian made products because of high cost of foreign goods. This makes our balance of payment to become favourable.

In the long run (in future), the high rate of export from Nigeria and low import of foreign products by Alaba guys (lol) will increase the value of our naira.

truthspeaks:
Good points u v made bt the govt of d day r nt help matters. President z on frequent travels wch is draining a little part of our foreign as he z spending in dollars n nt naira.

D diversification talk is lip service n no sign has bn shown so far.

Oil z still d focal resource of economy.

No direction of economic policy 2 aid n attract foreign investors

CBN z confused in its monetary policies.

Security z still a big issue even under buhari.

Local producers r nt bn encouraged.

I jst hope baba's case won't be worse than Jonathan's

grandstar:
The currency needs to depreciate now because the forex inflow has reduced drastically. It is because the government has refused to allow it depreciate at the official market as led to its massive depreciation at the black market.

eibusayo:
It's risky for our economy now because the rate of many business transaction that's dependent on exchange rate is on the increase. Everything now that we buy in the market is do you know the exchange rate of dollar to naira now

Ama80:
it sounds positive but why is d president hesitant?

abbey621:
The Naira was devalued less than 2 years ago and we all saw the negative result, what makes people think it would work now?

2rutalk1:
Devaluation is a DELIBERATE reduction in the value of a country's currency in relation to the currencies of other countries. Devaluation is different from depreciation. Whereas devaluation is deliberate, depreciation of currency is caused by some macroeconomic factors.

However, Devaluation is used to discourage import and encourage export of goods and services across borders.

How do we achieve this? When a country's currency is devalued, foreign goods (imports) become so expensive because the value of the country's currency has been reduced making the value of the currency of her trading partner to go up. In this case, the foreign country will be enticed to import from Nigeria (for instance) and our hitherto importers will equally buy Nigerian made products because of high cost of foreign goods. This makes our balance of payment to become favourable.

[s]In the long run (in future), the high rate of export from Nigeria and low import of foreign products by Alaba guys (lol) will increase the value of our naira.[/s]

14:
Buhari is scared to devalue because of this 2 things;

1. If the Naira is devalued to N300 to the dollar, inflation will rocket to 25%

2. If the Naira is devalued to N300 to the dollar, Nigeria's GDP calculation will fall from $510bn to $364bn, close to SA's GDP and if the low oil price persist, that would mean Nigeria might loose its top spot as Africa's biggest economy.

Those 2 points are the main reason for buhari's refusal to devalue, but in so doing, nigerians themselves will suffer, no money will flow into the country. Nigerian government is choking the economy. It will take time to repare the damage. What is happening currently for not devaluing, is to stagnate the economy.

"telecommunications tower operators spend some N175 million every day on diesel which is used to power generators at their towers housing base transceiver stations (BTS) that make it possible for Nigerians to use GSM service to make and receive calls."

Ama80:
it sounds positive but why is d president hesitant?

drss:
because he doesn't understand economics. he's a cattle rearer by profession.

Sugarhugs:
I have been wondering how come its 300+ here and google saying 198.

2rutalk1:
It happened to Zibabwe because their economy is not ripe for devaluation. Any country that has little or no products and services for export has no business devaluing her currency.

2rutalk1:
The President is hesitant because our economy may not actually reap the benefits of devaluation for now because we are import dependent economy - we have little or nothing to export to other countries. Therefore, even if our currency is devalued and import is discouraged as it is always the case, can our importers source the products locally? This will worsen the situation. What we need to do now is to diversify our economy, make the business/macroeconomic environment conducive, and ultimately, pursue import substitution strategy of industrialization. Import substitution strategy is a situation whereby goods and services that are hitherto imported from foreign countries are manufactured locally.

2rutalk1:
Devaluation is a DELIBERATE reduction in the value of a country's currency in relation to the currencies of other countries. Devaluation is different from depreciation. Whereas devaluation is deliberate, depreciation of currency is caused by some macroeconomic factors.

However, Devaluation is used to discourage import and encourage export of goods and services across borders.

How do we achieve this? When a country's currency is devalued, foreign goods (imports) become so expensive because the value of the country's currency has been reduced making the value of the currency of her trading partner to go up. In this case, the foreign country will be enticed to import from Nigeria (for instance) and our hitherto importers will equally buy Nigerian made products because of high cost of foreign goods. This makes our balance of payment to become favourable.

In the long run (in future), the high rate of export from Nigeria and low import of foreign products by Alaba guys (lol) will increase the value of our naira.

charlsecy:
You are NOT on point. His reluctance to devalue Naira is well-founded.

Google takes the officially determined rates... not the market rate.

asamaigho:
bros no over exegerrate am na,.....2trn cannot be 50% of 6trn na.
do ur maths,is 30percent.

and we really need dat loan to boost d capital expenditure,and wen dat is fully implemnted,it will shore up d economy.

unbeat007:
does devaluation affect the prize of goods in a country where devaluation has taken place?

otitokoroleti:
hahaha, the price is already up due to the FG refusal to devalue the naira. bajaj boxer motorcy was sold at 105-110k in december but now its 145k. a visit to mobile phone seller will show you the reality of FG refusal to devalue naira. #fingercrossed

14:
Budget deficit stands at N3trn, which is $15bn and half of nigeria's budget. Do your research
The loan will come with conditions, if nigeria does not devalue, no loan will be granted. watch the space

Thatitan234:
So you think devaluation will restore bajaj to 105k??
you are a joker

urchmanx:
I guess you didn't know the history of Zimbawa and what happened to them. They never devalued their currency, what happened to them was depraciation and not devaluation as a result of the president decision to take over land owned by foreigners. That made international community to put an embargo on their export. This resulted to hyper inflation. Someone just explained this in a simple language guess you never cared to read. I am just putting your comment straight because this is an educative trend. Devaluation and depraciation are two different issues. Thanks

Psalmwhyte:
Mehn!.... Dis explaination is quite lucid 2 'we' as laymen but wia u dey OP b4 PMB chose dat ''Mrs. Kemi Adeosun'' as d finance minister wia we hav sure calibre of economists hia on Nairaland... Well,as 4 d devaluation of d naira hw will a commoner hav a feel of it?
Will it reduce d price of comodities in d market?
Will it make landlords reduce dia house & shop rents?
Will it in any way mak d current govt reduce d amount of fees paid in our various institutions of learning?
Questions dat are begging 4 answers.
#team#1=$1#

Psalmwhyte:
Mehn!.... Dis explaination is quite lucid 2 'we' as laymen but wia u dey OP b4 PMB chose dat ''Mrs. Kemi Adeosun'' as d finance minister wia we hav sure calibre of economists hia on Nairaland... Well,as 4 d devaluation of d naira hw will a commoner hav a feel of it?
Will it reduce d price of comodities in d market?
Will it make landlords reduce dia house & shop rents?
Will it in any way mak d current govt reduce d amount of fees paid in our various institutions of learning?
Questions dat are begging 4 answers.
#team#1=$1#

kachola:
So who is on the right path now those in support or those against devaluation

NOETHNICITY:
I think import substitution also includes placing bans on importation of goods that are locally manufactured! Hope am right?

Emmeritus:
Due to devaluation of currency in Zimbabwe, 50 American cent is equal to 400 million Zimbabwean dollars.

Ama80:
it sounds positive but why is d president hesitant?

2rutalk1:
The President is hesitant because our economy may not actually reap the benefits of devaluation for now because we are import dependent economy - we have little or nothing to export to other countries. Therefore, even if our currency is devalued and import is discouraged as it is always the case, can our importers source the products locally? This will worsen the situation. What we need to do now is to diversify our economy, make the business/macroeconomic environment conducive, and ultimately, pursue import substitution strategy of industrialization. Import substitution strategy is a situation whereby goods and services that are hitherto imported from foreign countries are manufactured locally.