The World Bank recently reported that by August 2024, the Ethiopian birr, Nigerian naira, and Sudanese pound ranked among the poorest-performing currencies in Africa, with the naira depreciating by approximately 43% year-to-date as of August’s end. Financial expert Chika Mbonu highlighted the naira’s decline relative to other African currencies, a trend mirrored in Bloomberg’s ranking that places the naira among the world’s 10 weakest currencies, three of which—including Zambia’s kwacha and Angola’s kwanza—are African. Factors like unstable commodity prices, inflation, and limited dollar liquidity are contributing to these declines, making vulnerable economies susceptible to exploitation by wealthier nations.
Yet, a weakened naira needn’t spell only setbacks. President Bola Tinubu’s economic team could seize this opportunity by scaling production in the real sector to export goods where Nigeria has a comparative advantage. As Dr. Nnaemeka Obiaraeri, an investment banker, notes, Nigeria’s true challenge lies in productivity, not currency strength. Leveraging a weak currency to boost exports could create valuable foreign reserves, which can ultimately enhance the naira’s value and finance infrastructure growth. Strengthening the naira, however, would serve more than just currency concerns—it could shift Nigeria away from its heavy import dependency and open new markets in wealthier economies.
Nigerian policymakers might take an unconventional path to improve the economy. Major economic players such as the US and China have long shown that countries with weaker currencies can leverage lower export costs for profit. Nigeria, too, could benefit from expanding petroleum exports from companies like Dangote Refineries and the Nigeria National Petroleum Company Limited to countries with stronger currencies, capitalising on the global demand.
Despite subsidy removals, the naira’s depreciation continues to incentivise smuggling Nigerian petroleum products into West and Central Africa. By formally tapping into these markets, Nigeria could recoup some of the revenue lost to subsidies, estimated by the World Bank to be around N132 trillion. Finance Minister Wale Edun recently claimed that increased petroleum production would strengthen the naira, though this approach alone misses out on Nigeria’s capacity to add value to its resources, potentially limiting investors’ interests in easy returns.
To further stimulate the economy, Nigeria’s Federal and State governments could encourage private sector investments in agriculture and agro-allied industries. With Southern Nigeria producing agricultural raw materials for pharmaceuticals and textiles, and Northern Nigeria reviving its hides and skins trade, Nigeria could transform its foreign exchange outlook.
Governor Lucky Aiyedatiwa of Ondo State has committed to promoting agriculture and food security if re-elected in November 2024, promising to contribute affordable food exports to the US, where food prices are high. This export growth could be paralleled by investments in Nigerian education and healthcare sectors, reversing the outflow of students and patients to foreign countries while drawing in revenue from international students and patients seeking affordable services.
Nigeria could also capitalise on its electricity sector, as revealed by Sule Abdulaziz, CEO of Transmission Company, who noted that Nigeria supplies Togo, Benin, and Niger with 24-hour power. Expanding electricity infrastructure could open further export opportunities across West and Central Africa, ideally supported by funds redirected from the Excess Crude Account or subsidies.
With all these efforts, the Central Bank’s Governor Cardoso would only need to carefully manage the naira’s valuation to keep Nigerian exports competitively priced. However, Finance Minister Edun and the National Salaries and Wages Commission must ensure regular salary adjustments to meet the rising cost of living that comes with devaluation. Done well, this plan could increase foreign remittances, provide jobs for Nigerian youth, and support sustainable imports for the nation.
