By Inwalomhe Donald
Nigeria has experienced a significant depreciation of the naira over the past several decades. Since the naira was introduced in 1973 to replace the pound as Nigeria’s currency, its value against the United States dollar has declined considerably as successive governments adopted different exchange rate and economic policies. At its introduction, one US dollar exchanged for about 68 kobo.
The devaluation of the naira over the years reflects a major shift from the relatively strong exchange rate of the 1980s to the flexible, market-driven exchange rate in place today. Poverty levels have also risen over the decades, with various national and international reports estimating increasing numbers of Nigerians living below the poverty line.
1986–1996: Following the introduction of the Structural Adjustment Programme (SAP) in 1986, Nigeria experienced significant economic reforms, including exchange rate liberalisation. During this period, poverty levels increased according to available estimates.
2000–2010: Despite periods of economic growth, poverty remained a major challenge. By 2010, the BBC, citing official data, reported that about 60.9 per cent of Nigerians were living in absolute poverty.
2016–2020: Economic recessions and declining oil prices placed additional pressure on the economy, with millions of Nigerians estimated to be living below the poverty line.
Timeline of the Naira’s Devaluation
1986 (SAP Implementation): Under General Ibrahim Babangida, the Structural Adjustment Programme and the Second-Tier Foreign Exchange Market (SFEM) introduced a more market-based exchange rate system.
1999–2015: During Nigeria’s democratic era, the naira depreciated gradually, moving from about ₦22 to the dollar in 1999 to between ₦150 and ₦199 by 2015.
2016–2022: Falling global oil prices and pressure on external reserves led the Central Bank of Nigeria (CBN) to implement several exchange rate adjustments, with the official exchange rate exceeding ₦450 to the dollar by 2023.
June 2023 (Market Liberalisation): The administration of President Bola Tinubu unified the country’s multiple exchange rate windows into a market-driven system. The naira subsequently depreciated significantly before stabilising through policy interventions.
The removal of the fuel subsidy and the adoption of a market-based exchange rate in 2023 resulted in higher prices for fuel, transportation, food, and other goods and services. While the Federal Government has argued that the reforms are necessary to improve fiscal sustainability and attract investment, many Nigerians have experienced increased living costs.
Some economists have argued that implementing both reforms simultaneously placed significant pressure on households and businesses, while others maintain that the policies were necessary to address long-standing structural imbalances in the economy.
Exchange rate stability in developing countries is influenced by several factors, including export earnings, foreign exchange reserves, external debt obligations, investor confidence, and the diversification of the economy. Economists continue to debate the most effective approach to achieving long-term currency stability.
The Structural Adjustment Programme, introduced in the 1980s, remains one of Nigeria’s most debated economic reforms. Supporters argue that it sought to correct macroeconomic imbalances, while critics contend that it contributed to rising unemployment, poverty, and reduced industrial growth.
The depreciation of the naira has contributed to higher import costs, increased inflation, and reduced purchasing power. At the same time, some analysts argue that exchange rate reforms may improve competitiveness, encourage exports, and attract investment over the long term if accompanied by broader structural reforms.
The devaluation of the naira following exchange rate reforms in 2023 contributed to higher prices across the economy, particularly for imported goods and services. Although the minimum wage has been increased, inflation has continued to affect household purchasing power.
Nigeria’s economic reforms, including the removal of fuel subsidies and exchange rate liberalisation, were introduced to address fiscal and foreign exchange challenges. While these policies have increased government revenues in naira terms, debate continues over their impact on inflation, investment, economic growth, and living standards.
Inwalomhe Donald writes via inwalomhe.donald@yahoo.com.
