Naira Devaluation Spurs Hope for Non-Oil Exports, but Challenges Loom

Amidst economic uncertainties, Nigeria’s recent decision to devalue the naira offers a glimmer of hope for the country’s non-oil export sector in the upcoming third quarter. 

The Central Bank’s decision to float the naira on June 14 aims to bridge the gap between official and unofficial exchange rates, ultimately incentivizing exports.

Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, anticipates an upturn in non-oil export values for Q3, emphasizing that currency depreciation traditionally boosts exports. A weaker naira translates to more naira earned per unit of export, enticing exporters.

However, experts caution that the improvement may be modest due to lingering production and trade bottlenecks.

Tajudeen Ibrahim, Director of Research and Strategy at ChapelHill Denham, acknowledges these challenges, pointing out that while a weaker naira makes exports more profitable, production volume remains an issue.

One significant bottleneck is the worsening insecurity, crippling agricultural production in Nigeria. Farmers face displacement, loss of life, and destruction of crops and livestock, severely impacting food security and economic growth.

Ibrahim highlights the security risks, stating, “In the farming/agriculture space, there is insecurity. That insecurity in itself is a major risk in increasing the volume of output for farmers to export.”

Despite these hurdles, Nigeria’s non-oil exports saw a 5.6 percent growth between Q1 and Q2 in 2023, reaching N688.68 billion in Q2.

Experts remain cautiously optimistic, emphasizing that a weaker currency should encourage more exports, even as challenges persist.

At the close of the second quarter, the naira had depreciated by 64 percent, falling to N763.00/$1 from N464.50 per dollar on June 1st. While uncertainty prevails, the promise of a revitalized non-oil export sector offers a glimmer of economic hope for Nigeria.