Naira Devaluation Will Increase Nigeria’s Debt By Over N1trn-Economist

Nigeria’s total debt may increase by about N1trn after the Central Bank of Nigeria devalued the naira to N410 against the dollar.

The Central bank recently bowed to pressure to harmonise Nigeria’s foreign exchange windows.

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It devalued the N379 official rate to N410 close to the Investors’ & Exporter (NAFEX) Windows rate where investors and exporters trade.

But the apex bank governor denied adopting the NAFEX rate as the new official rate.

Nigeria’s debt has hit N32.9trn ($86.39bn) while the external component of the debt is N12.7trn ($33.35bn).

The external debt was converted at N381 per dollar, according to the Debt Management Office.

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Devaluing the naira means a readjustment of the external component upwards by the debt manager using N410.

Nigeria’s external debt by implication will hit N13.67trn, up by N967.1bn from the N12.7trn held as of March 2021.

“You can actually owe more money by borrowing no money if you devalue your currency, particularly the component that is external borrowing from the debt profile,” Paul Alaje, Senior Economist at SPM Professionals said on TVC on Monday.
Goods and services have become more expensive in Africa’s biggest economy due to inflation which is at 18.12 per cent and the eight per cent depreciation of the naira.

Alaje said, “Even though you are earning the same amount of naira, your counterparts in Ghana, your counterparts in the United States, your counterparts in the UK will continue to live better than you are living because the proportion, the purchasing power of naira is what is affected.”

He said, “Nigeria may still devalue naira if the economy is not checked. What it will do is that more and more people will become poor and more and more people will be out of work.”

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