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PROJECT TOPIC:WHY DEVALUATION HAS NOT SUCCEEDED IN NIGERIA

WHY DEVALUATION HAS NOT SUCCEEDED IN NIGERIA

 

INTRODUCTION

In answering the question why devaluation has not succeeded in NigeriaDEVALUATION” Devaluation is a sudden fall in the value of a currency against other currencies. Strictly devaluation refers only a sharp fall in currency within a fixed exchange rate for instance agriculture, which used to be the pivot of the economy, showed greater decline since after independence. This was due to the discovery of crude oil and its importance to the whole world. The revenue generated from oil appeared to have made more effective impact towards the development of the Nigeria economy then agriculture. This led to the sudden neglect or agriculture, to the extent that its contribution to the Gross Domestic Product was Negligible. The contribution of agriculture to the Gross Domestic product fell 39.9 percent in 1970, 1971 and 1972 to 18 percent with occasional these was when the Nigeria devaluation was very high.

WHY DEVALUATION HAS NOT SUCCEEDED IN NIGERIA

Reasons why devaluation has not succeeded in Nigeria, is the inherited structure by the readers that is the inability of Nigeria readers to change the inherited programmed economy, which was designed to disarticulate the Nigeria economy. Balance of payment deficit, is one of the problem, consider a situation where a country is suffering from balance of payment deficit, not because she has no goods to export her products but because of their comparative high prices. The high price of her goods might have emanated from some underlying macroeconomic imbalances such as high inflation, high cost of factors and over valuation of national currency. Which a country has no equilibrium in the in the more demand than supply in the money market, if there is more supply than demand in the labour market and it there is productivity of labour lags behind wages and salaries and in the foreign exchange market, if there is less demand for domestic currency by owners of foreign currencies than supply, if this kind of situation exist in a country, then it will suffer from “fundamental disequilibrium” in her balance of payment.

The balance of payment deficit which has rise resulted from high price of exported products and this in turn resulted from overvaluation of domestic currency for instance, a currency of trading patterns of a country suffering from balance of payment deficit. The solution is to bring down the exchange rate of a country’s currency as expressed into the currency of a trading patterns of the rest of the world is what is know as devaluation of national currencies. This act of bring down or reducing the exchange rate of a currency is usually performed by the monetary system.

WHY DEVALUATION HAS NOT SUCCEEDED IN NIGERIA

 

 

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