Nigeria: The Central Bank unifies exchange rates

In Nigeria, the central bank has put an end to the segmentation of the foreign exchange market, which means that the naira will now be traded at market rates instead of being fixed against the US dollar and other currencies.

This decision, welcomed by Nigerians, comes five days after the suspension and subsequent arrest of former CBN director Godwin Emefiele.

Until then, several exchange rates had been applied, depending on the sectors involved in the transactions. These announcements by the central bank caused the naira to devalue by almost 40%, and the currency has since recovered.

According to analysts, this unification of the exchange rate should stimulate money inflows and help stabilize an economy battered by galloping inflation and record unemployment.

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“We had trouble finding US dollars simply because the Central Bank of Nigeria would only supply them to exporters, using them to pay medical bills, business trips…To get around this problem, we had to source them from the markets, you need dollars, go to the market, and whereas on the markets, it’s the law of supply and demand that determines the price,” explains Sam Chidoka, CEO of Kairos Capital.

What’s more, experts warn, these measures will impact the prices of imported goods, which could affect many people in a country heavily dependent on imports. Public debt is also expected to increase due to some borrowing in US dollars, which will lead to a rise in the total debt/GDP ratio.

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