Implication of the Currency Overvaluation in Nigeria

| 2011| | | [AN INTERPRETATION AND ANALYSIS OF THE IMFS CONCLUSION OF THE NIGERIAN CURRENCY]| | decision maker SUMMARY Obiajulu Manufacturing Company, a leading manufacturing company in Nigeria, mandated its Chief prep and Business Development Officer to present the interpretation and feasible implications of the IMFs conclusion about the value of the naira on the company. The IMF cogitate that the Directors took note of the Staffs assessment of an overvaluation of the Naira, and accented that greater exchange set out flexibility would prevent one-way bets and cushion external shocks. Highlighted below are the relevant statistic and implications on Obiajulu Manufacturing Company. i. The manufacturing welkin contributes about 4% to the Nigerian GDP. This depicts the fact that Nigeria is an substance dependent economy and an enabling economic environment exit be a necessity to the growth of the sector. This also shows that the manufacturing sector is very vulnerable to external shocks. ii. The current naira exchange rate to the dollar is $151.12 to N1. In Nigeria, at that place is a t/-3% streak which implies that the rate is being managed by the CBN.

A devaluation of this currency pull up stakes result in inflationary pressures in the economy mostly because it will make writes more expensive and because the country is present moment dependent. Current inflation rate is at 11.1%. Devaluation will be unfavorable for OMC as it would have to spend more to import capital goods and raw materials necessary for production. It would also result in the increase in price of OMC products. iii. Nigeria is currently ranked 127th of 139 countries in the global competiveness report. This simply shows that Nigeria cannot thrive if the currency is devalued. This is because Nigerian companies cannot take the domestic demand that will arise and even if they do, there exists little confidence in the quality of the goods or services, twain locally and abroad. iv. External... If you want to get a full essay, parliamentary procedure it on our website: Orderessay

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