There is currently an intense pressure on the Buhari led Federal government of Nigeria to devalue the country's currency, the Naira.
The apostles of the Naira devaluation includes the IMF, World Bank, some Western governments, foreign media outfits such as Reuters, Bloomberg, and the Economist. Nigerians advocating for the devaluation of the Naira includes Mr Ayo Fayose, the governor of Ekiti state, Prof Pat Utomi and some opinion holders. The Federal government of Nigeria have resisted these pressure.
Here are some reasons why the naira should not be officially devalued:
1. An official devaluation of the Naira will not increase the quantity of dollars available at the Central Bank of Nigeria, the sales of dollars will highly restricted. The black market rate of one US dollar will be about 450 to 500 naira.
2. The naira cost of importing fuel will increase, the subsidy on a litre of petrol would be up to 60 naira or more, if subsidy on fuel is removed, the official price of petrol will be about 150 to 180 naira. In times of fuel scarcity the black market cost of a litre of petrol will be 300 to 450 naira.
3. The cost of imported goods such as phones, computers, electronics, building and construction materials, raw materials for manufacturing, spare parts, vehicles and equipments will increase by 50 percent from their current levels.
4. The cost of executing government infrastructural projects would increase by 50 percent due to high cost of imported construction materials.
5. The Federal and State government loans that require dollar payments will require more naira to service these loan commitments.
6. Nigerian banks and companies that took foreign loans in dollars will have a hard paying these dollar loans, this will lead to decrease profit, high cost of business operations and this will lead to massive job losses. Some banks and Companies may eventually close shop.
7. Labour unrest and trade dispute will occur due to hyperinflation, there will be regular strike actions by trade unions, demand for increase in wages and salaries, some States may collapse and some government agencies will be crippled due lack of adequate funds.
8. No viable exports from Nigeria apart from crude oil. The Chinese government is able to benefit from a devalued currency because they have lot of manufactured goods to export to other countries.
It will be a very tragic mistake if the Buhari led Federal government of Nigeria caves in to pressure from the Western powers by a further official devaluation of the Naira it will be a recipe for social unrest.
Written by JOHN UZIE,
Kwale, Delta State
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