The Positive Side of a Having a Weak Naira – Expert

The Nigerian naira has recently been labeled one of the weakest currencies in Africa, with a staggering depreciation of about 43% as of August 2024, in reference to the World Bank. 

According to an expert, while this situation poses challenges, it also presents unique opportunities that can be harnessed for economic growth. If handled strategically by President Bola Tinubu’s administration, the weaknesses of the naira could become a powerful tool for boosting the Nigerian economy. 

What a weak currency means

A weaker currency may seem like a disadvantage, but it can actually provide a competitive edge in the global market. When a currency is low in value, Nigerian goods and services become cheaper for foreign buyers. 

This dynamic can increase demand for exports, particularly in countries with stronger currencies. For instance, American and Chinese consumers often seek affordable products from countries with weaker currencies, allowing Nigerian manufacturers to tap into a wider market.

How it can help leverage natural resources

One immediate way to capitalize on a low naira is through the export of petroleum products. With the removal of subsidies, Nigeria has the chance to turn its refineries, such as those operated by Dangote and the Nigerian National Petroleum Company Limited, into hubs for exporting to West and Central African countries. 

Many of these nations have stronger currencies, making Nigerian products appealing. By focusing on petroleum exports, Nigeria can reclaim some of the estimated N132 trillion revenue lost to subsidies, thereby strengthening its economic position.

It helps encourage local production

The real challenge for Nigeria is not merely currency depreciation but rather its lack of productivity. Investment banker Dr. Nnaemeka Obiaraeri emphasizes that improving productivity should be the focus. By encouraging the local manufacturing sector to produce goods for export, Nigeria can create a sustainable economic model. 

This includes enhancing the agricultural sector to turn crops into raw materials for industries like pharmaceuticals and textiles. The northern regions can revive the hides and skins trade for export, contributing significantly to foreign exchange earnings.

Revamping Education and Healthcare

Another vital area for growth is education. To attract foreign students, Nigeria must improve its tertiary institutions. Just like in the 1960s and 70s, when Nigeria was a top choice for international students, investments in education can draw in foreign currency and stimulate the economy. 

Moreover, enhancing healthcare facilities will help reduce medical tourism, allowing Nigeria to become a hub for health services in the region.

Energy Production Expansion

Nigeria already has the infrastructure to supply electricity to neighboring countries like Togo and Benin, which rely on Nigerian power for their needs. 

This presents an opportunity to expand the energy sector further, tapping into the electricity market in West and Central Africa. By investing in electricity, Nigeria can bolster its industrial strategy and improve the overall economic landscape.

Helps revalue the naira

As Nigeria works to boost productivity and expand its exports, the naira’s value will naturally strengthen. However, this does not mean that the naira should remain static. Instead, there’s a case for further controlled devaluation to keep Nigerian products affordable for foreign consumers. This strategy could optimize foreign remittances, facilitate imports, and create job opportunities for the youth.

Regular Salary Adjustments

As the economy grows, it’s crucial that the Finance Minister and the National Salaries and Wages Commission regularly review salaries to reflect the cost of living, particularly after each devaluation. 

Implementing such adjustments can ensure that workers maintain their purchasing power amidst economic changes.