Currency Devaluation - SS3 Economics Lesson Note

Currency devaluation is a situation where a country's government deliberately lowers the value of its currency in relation to other currencies. This is usually done by the government or central bank of a country in order to make their exports cheaper and more attractive to foreign buyers, as well as to reduce their trade deficit. However, currency devaluation can also have negative effects on a country's economy, such as inflation and increased cost of imports.

In Nigeria, currency devaluation refers to the deliberate reduction in the value of the Nigerian naira (NGN) against other major currencies such as the US dollar (USD) and the Euro (EUR). This has happened several times in Nigeria's history, with the most recent one occurring in 2020, where the naira was devalued by 24% due to the impact of the COVID-19 pandemic on the country's economy.

The devaluation was aimed at making Nigerian exports more competitive in the international market and reducing the country's trade deficit. However, it also led to a rise in inflation and increased the cost of imported goods, which had a negative impact on the purchasing power of Nigerian citizens. Thus, it is important to consider the potential consequences before making such a decision