In the current global economy, the Turkish lira and Nigerian naira have become crucial players facing significant challenges. So, it’s time we looked into the multifaceted impact of these currencies on their respective regional economies, exploring both the adversities and opportunities they present.
Turkish Lira: Navigating Challenges, Unlocking Opportunities
Since 2018, the Turkish lira has grappled with substantial devaluation, leading to economic challenges. The precipitous drop, exceeding 60% against the US dollar, triggered a ripple effect on Turkey’s economy, marked by high inflation, soaring interest rates, and dwindling foreign reserves. These repercussions affected the Turkish people, impacting purchasing power and living standards.
However, amid the crisis, the lira has shown a paradoxical duality, influencing both positive and negative outcomes for the regional economy. A weaker lira renders Turkish exports more competitive globally, particularly in neighbouring countries like Iraq, Iran, Syria, and Georgia. This stimulates the Turkish trade surplus, fostering job creation and income for exporters. Additionally, the tourism sector benefits from Turkey’s affordability, attracting visitors from Europe and the Middle East, thereby boosting tourism revenues.
To navigate these challenges, the Turkish government and central bank implemented various policies, including interest rate reductions, increased foreign reserves, and subsidies to affected sectors and households. The success of these measures relies on promptly and effectively addressing underlying structural issues and external pressures.
An exemplary project showcasing the lira’s regional contributions is the Osmangazi Electricity Distribution Network Modernization and Expansion Project². This initiative, backed by a senior loan in Turkish lira, aims to enhance the efficiency and reliability of electricity distribution in the Osmangazi region. The project not only promises economic benefits but also aligns with global sustainability goals by integrating renewable energy sources, mitigating climate change, and creating employment opportunities.
Nigerian Naira: Adversity and Opportunity in Harmony
In West Africa, the Nigerian naira, facing an 80% devaluation against the US dollar since 2016, has encountered economic challenges mirroring those of its Turkish counterpart. The Nigerian economy, heavily dependent on oil exports and imports, witnessed elevated inflation, interest rates, and reduced foreign reserves, impacting the purchasing power of its citizens.
Yet, akin to the Turkish lira, the naira’s devaluation presents a dual narrative. A weaker naira enhances the competitiveness of Nigerian exports globally and regionally, particularly in neighbouring countries such as Benin, Niger, Cameroon, and Ghana.
This stimulates the Nigerian trade surplus, contributing to job creation and increased income for exporters. Additionally, the tourism sector benefits from the affordability of Nigeria as a destination, attracting visitors from Europe and the Middle East.
The Lagos-Ibadan Railway Project is an illustrative project highlighting the positive impact of the naira on regional growth. Embedded within the extensive Lagos-Kano Railway Project, this initiative establishes a crucial link between Lagos, Nigeria’s economic hub, and Ibadan, the primary metropolis in West Africa.
Financed by the China Export-Import Bank and executed by the China Civil Engineering Construction Corporation, the project aims to enhance railway efficiency, safety, and reliability. Moreover, it contributes to the integration of diverse transportation modes, fostering a multimodal transport system in Lagos while creating jobs and mitigating environmental impacts.
Conclusion: Balancing Act for Regional Prosperity
In conclusion, despite economic challenges, both the Turkish lira and the Nigerian naira wield significant influence over regional economies. Their devaluation, while posing internal challenges, opens avenues for regional trade and economic growth.
The success of these endeavours, be it the Osmangazi Electricity Distribution Network Modernization in Turkey or the Lagos-Ibadan Railway Project in Nigeria, hinges on adeptly navigating economic complexities and fostering regional cooperation.
As these currencies tread the delicate balance between adversity and opportunity, their regional impact underscores the need for strategic policies, sustainable development initiatives, and international cooperation.
The Turkish and Nigerian experiences serve as valuable case studies in understanding the intricate relationship between currency dynamics and regional economic growth, offering insights that resonate beyond their borders.
In what other areas do you think Lira and Naira are having great impacts in their individual regions? Let us know in the comment section.
Reference:
Asian Infrastructure Investment Bank. (2023). Osmangazi Electricity Distribution Network Upgrade and Expansion Project. Retrieved from