Strategic Agenda For The Naira: What Implication For The 2014 Devaluation?
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Abstract
Government policy reforms in various sectors of the Nigerian economy have hardly gone unchallenged by hostile public opinion which do derail or abort such reforms. The plans for currency redenomination(2007) and currency restructuring(2012) were no exceptions. Given the 2014 devaluation of the naira, this paper examines some contributions to the debate and implication of policy abortion for the naira exchange rate. The objectives among others, are to determine whether such contributions were based on scientific literature; whether conditions for their proposed adoption in literature were met and to estimate the Naira/Dollar exchange rate post 2014 devaluation had the redenomination taken place, as well as attempt a theory to support the policy. The methodology compares conditions in scientific literature, with the economic conditions and expectations the Central Bank of Nigeria adjudged auspicious to adopt the policies. It also estimated the Naira/dollar ratio post 2014 devaluation on the basis of the policy-estimated exchange ratio of $1=N1.25. The results revealed that while the criteria and expectations in literature were met, contributions to debate fell short of scientific literature while the Naira/dollar ratio post 2014 devaluation would have been $1/N1.35 and would allay the fear of higher exchange ratio and inflation from further devaluation in 2016. The paper creates a theory to support the policy and concludes that although no theory links re-denomination and denomination to any economic gain such as growth and reduction in inflation, these gains have theoretical links with complementary policies of the agenda as expounded in the work. The paper recommends that there is need for policy issues to be debated scientifically as there is hardly any economic policy devoid of a theoretical framework.