The National President of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Dele Kelvin Oye, has said that while the immediate effect of the devaluation of the naira on exports may be positive, the broader implications of a persistent devaluation are multifaceted.
Oye said this in response to comments by the Nigeria Governors Forum (NGF) claiming that the recent devaluation of the naira was fuelling food and grain export to West African countries as Nigeria’s food is now the cheapest in the West African region due to the naira fall.
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The NACCIMA President in a statement said the observations made by the NGF highlight a nuanced aspect of currency devaluation especially its effect on trade competitiveness.
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He said: “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 NACCIMA boss said the broader implications of a persistent devaluation were multifaceted.
The statement explained, “On 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. On 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.”
Analysing the short-term gains versus long-term health, Oye said that while devaluation might boost exports in the short term, there were concerns about the long-term health of the economy if the underlying causes of the devaluation, such as macroeconomic instability or policy uncertainty, were not addressed.”
On sustainable export growth, the NACCIMA President noted that “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.”
He further stated, “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.”
