Currency Volatility Threatens Tinubu’s $1 Trillion Economy Ambition
The relentless instability in Nigeria’s forex exchange market and the persistent weakness of the naira pose a substantial threat to the country’s ambitious goal of becoming a $1 trillion economy.
A recent analysis by Nairametrics reveals that naira devaluation has led to a staggering loss of approximately $193 billion in the country’s Gross Domestic Product (GDP) when converted from naira to dollars.
Over the year-long period from Q4 2022 to Q3 2023, Nigeria accumulated a total GDP of N224.54 trillion.
Converted to U.S. dollars at the exchange rate at the end of September 2023, the GDP stands at around $292.08 billion.
However, using the pre-FX unification exchange rate, the GDP would have been approximately $485.09 billion.
The naira’s devaluation by 39.79% triggered a corresponding loss in the GDP’s value in dollar terms.
Despite a quarterly increase in naira value, Nigeria faces a currency volatility of up to 40% in the current year.
Nigeria currently leads the African economy, surpassing South Africa, the next in line. However, both countries have experienced currency declines, with the naira depreciating more significantly.
The analysis suggests that for Nigeria’s GDP to fall below South Africa’s in dollars, the naira would need to decline to approximately N900/$1.
While the Federal Government aspires to achieve a $1 trillion economy by 2026, the recent economic landscape and projections indicate a considerable gap from this goal.
The Central Bank’s efforts to address forex challenges include tranche payments and the establishment of forex frameworks.
Despite these reforms, there is a pressing need for stability in the forex market to bolster the naira against the dollar, ultimately contributing to Nigeria’s GDP growth in dollar terms.
The path to a trillion-dollar economy requires careful consideration of economic conditions, exchange rates, and potential strategies, as the nation navigates the challenges of currency devaluation.
Source: Nairametrics
