Why the Nigerian Naira is losing value

Posted by Felix Okoli on Monday January 19, 2015 at 16:25:55:

Within a space of less than three months the Naira has lost much value; the economist will say that the Naira has been devalued. The Naira went from a hundred and seventy two Naira per dollar to over a hundred and ninety two Naira; and the alarming part of this is that with the look of things, the Naira will continue to loose its value unless something is done as a matter of emergency to correct the situation.

Since the 1980s, the Nigerian Naira has been constantly losing value against major world currencies and we are here to highlight some of the reasons why this is happening:

- Less exports than imports: When a country that engages in international trade does more imports than exports, the value of it's currency is likely to fall over a period of time as a result of the fact that there is more demand for foreign currencies than the local currency from importers.

- Excess demand for foreign currencies: This is the major reason why our local currency keeps losing value over foreign currencies. When people in Nigeria demand for currencies like the US dollar, British pounds or Euro than the Naira, it ultimately pushes up the price of those currencies over the Naira.

- Over-dependence on oil exports: Nigeria's economy has mostly been focused on crude oil exports and this had made the nation lazy such that a collapse in the oil market could immediately affect the nation's economy. If money from oil exports had been diversified into other sectors like agriculture, then we would be able to survive without oil and still be able to earn foreign income.

- Preference for foreign made products and services: Most Nigerians nowadays follow the Western world in things like education, health, fashion, business and so on. We now place more value on foreign made goods than ones made in Nigeria. Nowadays, Nigerians only buy goods that are made in Nigeria if they were provisions but our clothes, shoes and electronics are mostly imported. Even our politician who earn millions of Naira use it to buy foreign currencies for medical and shopping vacation in foreign nations. It doesn't help the Naira.

- Stealing of Public funds by Nigerians in government: For over many years in Nigeria's political leadership, many people in government have resorted to stealing public funds and keeping them in foreign bank accounts outside Nigeria. This has not helped grow the economy as the money was not invested in productivity or creating jobs.

- Little or no trust in the Nigerian economy: Another reason is because of the fact that many investors and people with big capital don't trust the Nigerian economy as much as they trust foreign ones. Some of these people tend to move their funds abroad once they've made profit rather than keep it productive in the country.