ABSTRACT

This research study investigates the Devaluation of currencies, solution for economic growth and development in Nigeria. Currency devaluation as a policy instrument has been used in several countries (both developing and developed). The decision taken by monetary policy committee in November 2014 on naira devaluation has generated a lot of arguments both for and against and its workability on an import driven economy like Nigeria. Renowned economists in the country have not had any consensus hence the need to analyze the impact of currency devaluation on economic growth and development is highly important. Exchange rate, import, export and interest rates were used as proxies for currency devaluation while GDP was used to measure growth. A time series data was used to analyze the variable in question, from 1974-2015. The result of the analysis which is in line with the a priori expectation shows that devaluation reduces importation; encourages exportation and increases interest rate. Inflation and unemployment are the side effects of currency devaluation in the short run according to Marshall-Lerner’s condition which produces a J-shaped curve of devaluation. Discretionary policies such as fiscal measures should be put in place to curb the associated increase in inflation. This research study identifies that diversification of export is inevitable for Nigeria to achieve economic growth in the face of devalued currency.