Devaluation of currency is a deliberate reduction in the value of a country's currency in relation to currencies of other nations. Devaluation shouldn't be confused with depreciation, as devaluation is a deliberate act by the central government of reducing the value of its currency through the central bank while depreciation is caused by macroeconomic factors.
The bone of contention in devaluation of Naira is to create incentives for export but just like two sides of a coin, while it makes export cheap, it also makes import expensive.
Nigeria as a country is known to be blessed with vast natural and human resources. In Africa, Nigeria happens to be the largest producer of Crude Oil and also has the largest economy but coincidentally, Nigeria is one of the top ranking nations in terms of poverty and several factors contribute to the dearth in the growth and development of the country.
The devaluation of currency is a catalyst to Nigeria's development *in* *the* *long* *run*. Since the commercial exportation of crude oil in the 70s, Nigeria has moved from being self-sufficient in food production and export of cash crops to a major importer of food and virtually everything consumed in the country which is very detrimental to the development of a country. The mono-economic status of the Nigerian economy is not a good status for a country as it limits the rate of development.
With the devaluation of Naira, imports would be affected greatly, as it increases the cost of importation which would lead to a reduction in the rate of import. Thus, paving way for local producers to expand their business base as people will have settle for locally produced goods. This process would lead to increase in output, reduction in unemployment, increase in general income . All these components put together would place the economy on the path of development.
An economy that is self-sufficient in food production (Agriculture) accompanied with low unemployment would be very beneficial as it would boost the Gross Domestic Product(GDP) and would further facilitate diversification. Exports would boost in the long run and then there would be equilibrium in the balance of payments. The forces of demand and supply would restore the value of currency back to normal.
Of course, Nigeria export base is very weak and relatively inelastic and the whole economy depend on import in which a slight devaluation would affect the economy. Nonetheless, there is need for the current rate of importation in Nigeria to be discouraged so that it can pave way for local producers and manufacturers. The pains and and negative effects is only in the short run. In the long run, with the government setting good economic conditions for business to thrive in Nigeria, the pain and suffering would only be for a short period of time. The high cost of tomato importation has led to local manufacturing of tomato by Erisco foods limited and Dangote Group limited. With concerted efforts, more companies and investors(both local and foreign), would invest on various areas in the economy and the tempo of industrialisation will step up, thus creating an atmosphere for development.
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