The World Bank recently highlighted that by August 2024, the Nigerian naira was among the weakest currencies in Africa, with a year-to-date depreciation of about 43%.
While this trend poses significant challenges, it also presents unique opportunities that Nigeria can leverage to strengthen its economy.
Despite the naira’s weakness, investment banker Dr. Nnaemeka Obiaraeri argues that Nigeria’s real issue is not the currency itself but a lack of productivity. If President Bola Tinubu’s economic managers can focus on large-scale production, especially for export, Nigeria could turn the naira’s depreciation into an advantage.
Strategic Opportunities
Export Potential: A weaker naira makes Nigerian goods cheaper for foreign markets. This is particularly relevant for petroleum products. With the removal of fuel subsidies, there is a chance to capitalize on the profitable smuggling of petrol to countries with stronger currencies, potentially recovering significant revenue losses.
Agricultural and Industrial Growth: By encouraging investment in agriculture and agro-allied industries, Nigeria can transform primary commodities into manufactured goods for export. For example, Southern Nigeria can produce industrial raw materials for pharmaceuticals and textiles, while the North can revive the hides and skins trade.
Attracting Foreign Investment: Improving the education and medical sectors can draw foreign students and patients, bringing in convertible currency. Historically, Nigeria attracted students from across Africa; reviving this trend could bolster the economy.
Energy Sector Expansion: Nigeria already supplies electricity to neighboring countries. By increasing the capacity of its electricity sector, Nigeria can further expand its market in West and Central Africa, enhancing revenue streams.
Policy Recommendations
Devaluation Strategy: As the naira strengthens through increased productivity and foreign reserves, a controlled further devaluation could make Nigerian goods even more competitive in international markets.
Regular Salary Reviews: The Finance Minister and the National Salaries and Wages Commission should ensure that wages reflect the rising cost of living after devaluations to maintain purchasing power.
Collaboration Across Sectors: The incoming Minister of Industry, Trade and Investment should work with other economic leaders to create a conducive environment for reviving the real sector.
If executed effectively, these strategies could not only stabilize the naira but also optimize foreign remittances, support import financing, and create jobs for Nigeria’s unemployed youth. The path forward hinges on transforming challenges into opportunities through strategic economic planning and collaboration across sectors.
