In Nigeria, any weakening of the naira against the US dollar has historically had ripple effects on the local economy, with prices of goods and services often rising. However, it is not always the case with other economies, including those more developed than Nigeria and hardly seen to be greatly impacted by having weaker currencies. For some, the weaker currency is seen to be preferred, particularly in boosting exports.
The strength or weakness of a currency is what determines how much of it will be required by its citizens to get goods or services from other countries. On the flipside, it helps countries with seemingly weaker currencies in driving their exports.
A top example is China, the second largest economy by GDP, according to the World Bank, whose currency, yuan, is 6.77 to a dollar. Donald Trump, a former US president, had even accused the country of artificially keeping its currency low.
An implication for this has been a country like China gets to be competitive in the international market when its locally made goods are exported.
The gap is wider for a country like Indonesia, where one dollar is equivalent to 14,849 Indonesian rupiah. Yet, the country is the 16th largest economy in the world, with a GDP of N1.18 trillion, that is two and half times that of Nigeria.
For Nigeria, whose currency, naira, is 420 to a dollar at the official window and 710/$1 in the parallel market, every appearance of the currency getting weaker sees ripple effects and almost suggest the economy could crash as the currency gets weaker.
Yet, one dollar is equivalent to 1,303.64 South Korean Won, with the country ranked as the 10th largest economy in the world with a $1.8 trillion GDP. It continues to drive exports across the world with products that become competitively priced when converted.
For Japan, the world’s third largest economy by GDP, one dollar is equivalent to 132 Japanese yen. However, this weak currency (relative to the US dollar), encourages a country that is seen as one of the global technology powerhouses to boost its exports in global markets.
Indian, the world’s second most populous country and sixth largest economy has its currency exchanging at 78.97 Rupees to a dollar. But the country, like other developed economies, is able to function without desperation when its currency slides against the dollar. For it, like many others, exporting to the global market at a competitive rate makes the trade-off acceptable.