Nigeria facing exchange rate turmoil

The African nation has relinquished control of its currency in a bid to boost investment

Nigeria facing exchange rate turmoil – professor

A vendor holds Nigerian naira banknotes in a market in Lagos, Nigeria, February 16, 2023 ©  AFP / Michele Spatari

Nigeria’s decision to merge its multiple currency exchange rates could stabilize the African nation’s battered economy, but could damage entrenched economic interests that depended on the old system to import vital commodities, economics professor Dahiru Balami told RT on Saturday.

The Nigerian naira hit a record low of 860 per dollar on the black market late last week, a month after the country’s central bank devalued the currency in a bid to close the gap between the country’s official and unofficial exchange rates. By abandoning its artificially lowered rate, the government hoped to boost inward investment and ease a shortage in foreign currencies.

While the move has led to a surge in inflation, Professor Dahiru Balami of the University of Maiduguri told RT that this will likely ease as the market determines the true value of the naira.

Meanwhile, the abandonment of the fixed rate – which allowed some businesses to buy commodities at a preferential price tag – will harm industries that have “taken advantage of the multiple rates.” 

With “certain economic agents” now unable to purchase oil and gas at the central bank’s rate, “industries that are crucial for the development of the country” may be forced to pay more for imported commodities, and in turn pass that increase on to consumers, he explained. 

With fuel and electricity prices already climbing, the central bank will meet in Abuja on Monday and Tuesday to discuss raising interest rates.

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