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Nigeria Currency - The Naira - The Naira Is In Big Trouble!

Nigeria currency is the Naira. The symbol for the Naira is capital letter N with double strikethrough. That is, =N=.

The Nigeria currency, the Naira, was a strong currency against the U.S. Dollar and British pound for about three decades after Nigeria's independence in 1960. At some point 1 pound was equivalent to 0.75 Nigeria Naira. But not anymore. Today 1 British pound is equivalent to 250 Naira.

What a big flop!

The shrinking value of the Naira against USD and British GBP is due largely to Nigeria's over-dependence on imported goods. This "madness" for foreign manufactured goods has eaten so deep that virtually everything in Nigeria is imported. Locally manufactured goods have a hard time competing with their imported counterpart because Nigeria manufacturers face a huge cost challenge with the near-absence of public utilities.

The craze for imported goods has led to a huge demand for foreign exchange to finance imports. Consequently, demand for foreign exchange is much higher than supply, thereby forcing the Naira to slide downwards.

The downward slide of the Nigeria Naira is also driven by huge external debts.

The federal government is good at obtaining loans from the world bank and other international money lenders to fund projects. These loans are taken even in the time of plenty like the period when the price of crude oil skyrocketed to over $100 per barrel.

Repaying these loans hasn't always been easy. To make matters worse, many state governments joined the external borrowing bandwagon, further increasing the nation's debt burden.

As I write this, the US dollar, that at one time was 1 to 1, is 179 Naira to 1 dollar.

The central bank of Nigeria succeeded in maintaining a stable exchange rate between 2008 and early 2009 by increasing the country's foreign reserve. But that was not sustainable because it does not make business sense to keep huge reserves when your economy is begging for development.

How long will the Nigeria currency continue to fall flat in comparison to the US dollar and British pounds?

Only time can tell.

But as long as Nigeria continue to pursue imports instead of strategically focusing on building or growing its manufacturing capability, trade deficit will continue to widen. And that potends big trouble for the Nigeria Naira.

My advice?

Focus on growing the manufacturing sector. It is indeed the real sector.

It is the ticket to the good life for Nigerians and foreigners in Nigeria.

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