Experts List Three Steps for Nigeria to Strengthen The Naira
- The Nigerian currency has seen its value erode by about 100 per cent in the last seven years, impacting negatively on livelihoods
- Experts have lined up three steps the Nigerian government can take to strengthen the exchange rate and improve the quality of lives
- According to them, the steps will reduce the volatility of the exchange rates and stabilise the economy
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In early August, Nigeria’s local currency dipped to an all-time low of N710 to one dollar, the first in the currency’s history.
The Naira has lost about 100 per cent of its value in the last seven years and this has impacted the economy heavily.
Source: Getty Images
While currency devaluation has become a global phenomenon, Nigeria’s situation is very peculiar as the currency battles one of the worst inflation in its history.
The Nigeria Bureau of Statistics said recently that inflation in the country has hit about 19.22 per cent on a year-on-year basis. This is the worst inflation in Nigeria in 16 years, Vanguard reports.
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According to Joshua Ude, Nigeria can take one or two steps to stem the tide of rising inflation choking the incomes of Nigerians.
Export more goods and earn forex
In an interview with Legit.ng, Ude espoused solutions for the Nigerian government to make the exchange rate stronger and more effective.
Ude said export remains key to Nigeria's solution to curbing the issue of depreciation of the naira.
He said that the exportation of more goods will earn the country forex, especially as the country is battling a scarcity of forex.
Ude Said:
“When you export, you earn hard currency and that will strengthen your local economy and improve the livelihoods of the citizens.
"Ordinarily, devaluation would have worked best if Nigeria is an exporting country. If you earn forex and you come home and exchange it, imagine the impact on the economy.”
He stated that demand for any country's products automatically improves its currency.
Business Insider reports that a huge dollar or forex inflow into the country will strengthen the local currency.
Increase the interest rate
Joy Ogbu, a financial adviser and forex trader, stated that increasing interest rates is one of the ways Nigeria can strengthen the naira.
An increase in interest rates will make lenders see prospects of high yield and good return on investment and that will almost immediately aid in strengthening the naira.
Ogbu said:
“This is a honey port for FDI. Nothing attracts investors like good interest rates. It makes them some sort of confidence that they will reap the rewards of their investment."
Bring down inflation
Inflation causes the erosion of incomes. And the Nigerian government can tame inflation by producing more products. According to Ogbu, inflation means that there is an increase in demand and that a country can counter it by either importing the needed products or locally producing them.
She said.
“Naturally, inflation is better than deflation. It means your citizens have purchasing power and the only way you can match inflation is to provide the products consumers are chasing after.
“Produce them in large quantities or import them to reduce the high cost of the products or services in demand.”
Analysts predict what will happen to Nigeria if the naira continues its downfall
Recall that Legit.ng reported that Nigerians were alarmed on Wednesday, July 27, 2022, when news filtered in that the Nigerian currency has fallen to its lowest in history at N710 per dollar in the parallel market.
The news threw jitters down the spine of many who saw the fall as the crash of the economy under the watch of President Muhammadu Buhari and the Central Bank of Nigeria’s governor, Godwin Emefiele.
Nigerians were alarmed on Wednesday, July 27, 2022, when news filtered in that Naira has fallen to its lowest in history at N710 per dollar in the parallel market.
The news threw jitters down the spine of many who saw the fall as the crash of the economy under the watch of President Muhammadu Buhari and the Central Bank of Nigeria’s governor, Godwin Emefiele.
Source: Legit.ng
