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Naira Devaluation Reveals Flaws In Decision-Making Process – Thaddaeus

Naira Devaluation Reveals Flaws In Decision-Making Process - Thaddaeus

The devaluation of the Naira has been characterised, by the Chief Executive Officer (CEO) Safewater Energy and Environmental Restoration, SWEER Global, Thaddaeus Thompson, as a result of a flawed decision-making process of policymakers.

He admitted that devaluing the naira would cut down the amount owed on imports by the Federal Government to foreign countries, as reported by Vanguard.

Thompson added that for developing countries, currency devaluations had negative impacts, highlighting the “less to nothing” production activities experienced in Africa.

He said, “It is true that devaluing a country’s currency helps reduce imports and monies owed by the country to foreign trade partners.

“It also minimises direct borrowing and curtails unnecessary spending on foreign goods.

“Judging from these standpoints every citizen on the borrowing side shares the blame for the consequences that devaluation of currency often brings – ardent poverty.

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“A critical look at the assumptions and subsequent decisions that led to the devaluation of the Naira shows that there were flaws in the decision-making process.

“Devaluation of currency has often had a negative effect on developing nations, especially African countries that produce less to nothing compared to developed nations.

“Nigeria’s decision to devalue the Naira without taking into consideration its position as a non-supplier nation was a mistake.

“If say a school plans to raise funds by selling raffle tickets to the public at a school outdoor event and decides to devaluate the items it wants to sell, the visitors can buy more items with less money and the school will lose for reducing the prices of the items on display. This scenario might seem unrelated to foreign trade, but it does.”

Nigeria’s Loss, China’s Gain

Thompson highlighted Nigeria’s loss in economic interactions with foreign countries like China that is “a high supply nation”.

He Highlighted how Nigeria would lose money if it priced goods (in Naira) below ” a level that enables the nation cover” the cost at which goods are bought.

“If say a school plans to raise funds by selling raffle tickets to the public at a school outdoor event and decides to devaluate the items it wants to sell, the visitors can buy more items with less money and the school will lose for reducing the prices of the items on display. This scenario might seem unrelated to foreign trade, but it does,” hesaid.

“Those who thought devaluing the Naira will increase purchases from Nigeria made a huge mistake because this works only if the country has a high supply tendency or high demand for its goods abroad.

“It works well for China to devalue its currency because it’s the world’s leading producer of tangible goods.

“China is a high supply nation. Nigeria does not have the same tendency as China, therefore, devaluing its currency will benefit countries buying from Nigeria and not the Nigerian economy.

“If the Naira price of goods is set below a level that enables the nation to cover its costs of acquiring the goods and services sold in the country, the nation will lose money.

“While the government’s scheme of undervaluing the Naira will indeed increase the volume of sales made in Nigeria, this scheme results in the nation, on the net, transferring economic value to the country’s trading partners rather than the nation getting net economic value from those trading partners.

“So, the traders gain because the undervalued Naira subsidizes their consumption. Further, because the nation does make more sales, also reaping benefits are the people paid to work at the production facilities, as well as the stockholders who supply the goods sold in the country, which in today’s circumstance is the foreign countries, such as China, US, Germany, Britain, and Brazil (Nigeria’s main trading partners). But without question, the nation itself is made poorer.”

About Author

Kindness Udoh is a writer and media enthusiast with vast experience in journalism, copywriting, and features across beats. He also has professional certifications in creative writing. You can reach him via [email protected]

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