Financial experts have said the subtle devaluation of the naira in the guise of forex rate unification will have negative consequences in the form of higher debt portfolio by both the government and banks as well as fuel inflation.
Last week, the Central Bank of Nigeria officially adjusted the exchange rate of the naira to the dollar on its website from N361 to N379.
Uche Uwalaka, a professor of capital market at Nasarawa State University, said a negative side effect of the devaluation was that it would shrink asset values in dollar terms.
He said, “This will affect the global ranking of banking and capital market institutions.
“Banks that have borrowed in dollars from foreign institutions will be in more trouble.
“Our public debt stock will also rise in naira terms.”
In the short term, he said, the implication of the devaluation was that it would likely hurt the economy and bring some pains to most Nigerians given the country’s dependence on imports and over reliance on oil revenue.
Sam Nweze, a former President, Association of National Accountants of Nigeria, the cost of importing raw materials by manufacturing firms will increase tremendously.
“If you have to convert from naira to dollar, then a lot of naira would have gone to procure the dollar than when the exchange rate was lower,” he said.
He also observed that more naira would be needed to repay loans in dollar terms.