The Nigeria Governors Forum issued a press statement on Sunday evening and said the recent devaluation of the naira had led to continued export and Nigeria’s food and grains to West African countries, saying Nigeria food is now the cheapest in West Africa as a result of the naira fall, what is your take on this sir?
Subject: Impact of Naira Devaluation on Food and Grain Exports to West African Countries
The observations made by the Nigeria Governors Forum highlight a nuanced aspect of currency devaluation – its effect on trade competitiveness. The devaluation of the Naira, while presenting broad economic challenges, does appear to have inadvertently enhanced the competitiveness of Nigerian food and grain exports within the West African region.
This phenomenon is rooted in the economics of exchange rates. A weaker Naira means that Nigerian goods become less expensive for buyers using stronger currencies. Consequently, Nigerian food and grains are now more competitively priced when compared to similar products from countries with stronger currencies. This price advantage can lead to an increase in demand for Nigerian exports within the region.
However, while the immediate effect on exports may be positive, the broader implications of a persistent devaluation are multifaceted:
1. Inflationary Pressure. The cost of imported goods, including agricultural inputs such as machinery, fertilizers, and pesticides, will increase, potentially driving up domestic production costs over time.
2. Consumer Impact. The increased export of food and grains could lead to a reduction in domestic supply, thereby escalating food prices locally and aggravating food insecurity in Nigeria.
3. Short-Term Gains vs. Long-Term Health. While devaluation may boost exports in the short term, there are concerns about the long-term health of the economy if the underlying causes of the devaluation, such as macroeconomic instability or policy uncertainty, are not addressed.
4. Sustainable Export Growth: For export growth to be sustainable, it must be supported by productivity gains and not merely currency devaluation. Investments in agricultural technology, infrastructure, and human capital are crucial for maintaining a competitive edge.
In conclusion, while the devaluation of the Naira has made Nigerian food exports more attractive in the short term, it is essential to approach this development holistically. It is crucial to balance the immediate benefits of increased export revenues with the need for a stable macroeconomic environment and the well-being of the Nigerian population. Long-term stability and growth of the agricultural sector will require structural reforms that address the root causes of currency weakness, improve productivity, and ensure food security for the Nigerian people.
Yours sincerely,
Dele Kelvin Oye
National President Nigerian Association of Chambers of Commerce Industry Mines and Agriculture
