Conflicting Issues In Currency Devaluation and Economic Development in Nigeria From 1970 to 2009

Abstract

This work examines the conflicting issues in currency devaluation and economic development in Nigeria. While currency devaluation aims to adjust currency value to improve the economy, the situation is rather the reverse in Nigeria. The currency is devalued but variables of economic development are deteriorating. Based on this, the work sought to establish relationships among the balance of payments (BOP) position, foreign reserve position (FrP) and exchange rate, and export and import volumes. A modified macro simulation model is applied and the multiple regression model is used in analyzing the data collected. Inverse relationships between BOP and imports as well as FrP and exchange rates are established. The conclusion is that unless the objective of devaluation policies is fully aligned with the objectives of economic development, the situation will not improve. Based on this, recommendations are that more aggressive steps such as export incentive skill, infrastructure improvement, and domestic product quality upgrading be adopted to encourage the export of goods and services and discourage imports of those products available within the domestic markets.