Floating the Naira: Implications For the Nigerian Economy

Floating a currency is a neoliberal measure designed to ensure that government does not interfere with the foreign exchange market. It is a situation whereby the currency price of a nation is set by the forex market based on supply and demand relative to other currencies. This is in contrast to a fixed exchange rate, in which the government entirely or predominantly determines the rate. Mr. Cardozo, Nigeria's CBN Governor has been heavily criticized for embarking on the policy because of its deleterious effects on the economy.

The Nigerian economy has faced many challenges over the years, with issues such as inflation, unemployment, and poor infrastructure hindering its growth. One of the most controversial economic policies implemented by the Nigerian government is the decision to float the naira. While this policy was intended to promote economic growth and stability,

It has actually had negative effects on the economy. In this article posits that floating the naira hurts the Nigerian economy and why the government should consider alternative policies.

Floating the naira has led to a significant depreciation in the value of the currency. This has made imports more expensive, leading to inflation and increasing the cost of living for ordinary Nigerians. In a country where many people live below the poverty line, this has had a devastating impact on the population, pushing more people into poverty and exacerbating social inequality.

Furthermore, the depreciation of the naira has also affected businesses in Nigeria. Many companies rely on imports to produce goods and services, and the higher cost of imports has forced them to either increase their prices or cut costs. This has made Nigerian products less competitive in the global market, leading to a decline in exports and a loss of revenue for the country.

Floating the naira has also had a negative impact on foreign investment in Nigeria. Foreign investors are wary of investing in a country with an unstable currency, as it exposes them to significant financial risks. This has led to a decrease in foreign direct investment in Nigeria, hindering economic growth and depriving the country of much-needed capital.

A nation can only strengthen her currency by promoting manufacturing, growing her industries and investing massively in infrastructure to attract foreign direct investment. Presently, Nigeria is a crude oil monoculture, with other sectors of the economy largely underdeveloped.

Indeed, floating the naira has hurt the Nigerian economy in many ways. It has led to inflation, made businesses less competitive, and deterred foreign investment. Instead of continuing with this policy, the Nigerian government should consider alternative strategies to promote economic growth and stability.

Addressing the underlying issues that have caused the depreciation of the naira, such as corruption and poor governance, Nigeria can create an environment that is conducive to sustainable economic development. Until Nigeria invests massively in industrialization and manufacturing, the domestic currency will remain weak and beggarly.