Devaluation means decreasing the value of nation's currency relative to gold or the currencies of other nations. Devaluation occurs in terms of all other currencies, but it is best illustrated in the case of only one other currency. It refers to the fall in the exchange rate of a country's currency in relation to those of other countries.
Devaluation and Depreciation are sometimes used interchangeably, but they always refer to values in terms of other currencies and the value of currency is determined by the interplay of money supply and money demand. In common modern usage, it specifically implies an official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign currency. In contrast, (currency) depreciation is most often used for the unofficial decrease in the exchange rate in a floating exchange rate system.
Devaluation is usually undertaken as a means of correcting a deficit in the balance of payments. Some analyst are of the view that weakening the value of currency could actually be good for the economy—since a weaker currency will boost manufacturing production, which in turn will lift employment and all this will set in motion economic growth and keep the economy going.
Nigeria as a country in response to her dwindling fortune as a result of fall in the price of crude oil in the international market set up a reactionary policy of devaluing the naira and jerking up the interest rate. The implication of this is to make her export to be cheaper thereby encouraging importers to buy mostly our non oil products such as agricultural products and other solid minerals. This gives greater opportunities for International marketers to explore this under developed sectors of the economy.
Also devaluation makes import to be expensive and subsequently reducing importation into the country and thus improving terms of trade, increase revenue collection and savings in repatriation of profits and royalties by existing foreign investors, bringing illegal foreign exchange leakages into official channels and putting an end to gold smuggling. Inflow of foreign capital can be improved by devaluation only if prices do not rise.
The resultant effects of all these is the stimulation of economic growth through profileration and expansion of local industries as they are no more seriously competing with foreign industries. Also there is going to be consumption of more locally goods both internally and externally, which will result into demand for more goods and which will eventually result in employment opportunities for the populace.
Increase in local production has a serious implication for International marketer as there will be availability of many products to be showcased to the global community and the expertise of the International marketers will be required to persuade, cajole and appeal to the buying nations to buy proudly made Nigerian products.
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