Dear Subscriber,

Currency devaluation is not always bad news

There was a time when the international financial community frowned upon countries that tried to use competitive devaluation (beggar thy neighbour) strategy to gain export market share. That was decades ago, mainly in Southeast Asia. Recently, while some investors believe that a strong currency is synonymous with a strong economy, it is now becoming clear that devaluation as a strategy to address a deficit in the balance of payments has some good sides to it. It could be a magic wand for achieving economic competitiveness.

For Nigeria, the strategic devaluation of the naira would make exports more affordable in international markets, stimulating demand and boosting export-driven industries such as medical services. This presents an opportunity for the country’s healthcare industry to attract medical tourists who are seeking quality healthcare at a fraction of the price they would pay in their home countries. Beyond medical tourism, devaluation can make a country more attractive to tourists in general. Nigeria, with its rich cultural heritage, natural attractions, and vibrant cities, can benefit from increased tourism. This can bring in foreign currency, create employment opportunities, and stimulate the local economy.

GNI is better than GDP as a measure of wellbeing

Gross National Income (GNI), which is the aggregate income of all Nigerian citizens, home and abroad, has been considered by many to be a better measure of economic well-being than Gross Domestic Product (GDP). The former (GNI) includes financial flows and diaspora earnings. This means that Japa (the emigration of Nigerians to other countries, often in search of better economic opportunities) can offer positive benefits. By working overseas, an individual can earn a higher income, acquire new skills, and send remittances back home.

Remittances provide a social safety net and financial support for extended families, covering essential expenses like education and healthcare. Remittances can also be used as start-up capital for entrepreneurial activities, creating employment opportunities, increasing productivity, and could serve as a catalyst for broader economic growth. They reduce vulnerability to economic shocks and poverty, contributing to improvements in economic welfare.

In this latest edition of FDC Whispers, the Think Tank indepthly analyses these recent economic shifts, shedding light on what lies ahead for Nigeria in the coming weeks.