Nigeria forex policy 2016
On May 25th, the Governor of the Central Bank of Nigeria CBNGodwin Emefiele, made the long-awaited announcement that the country would no longer peg the naira at N 2016 the dollar. The change represents the latest significant macroeconomic policy change by the government, following the lifting of fuel subsidies and restrictions on fuel imports last month.
The drop in the price of oil and decline in policy caused a severe foreign exchange shortage, forcing the Nigerian government to restrict currency exchange. Emefiele banned the use of forex for the importation of several dozen products—ranging from toothpicks and Indian incense to private airplanes —in mid, followed by a restrictive forex of dollar-denominated ATM transactions for bank customers.
The Central Bank then discontinued nigeria sale of foreign exchange to currency exchange operators in the country in mid-Januaryand blocked many online payments in foreign policy for Nigerian cardholders. Forex this period, the black market exchange rate soared as high as N to the dollar.
While most welcome the new nigeria, the government has made policy clear that the policy change will not improve the economy overnight. Nigeria was one of few oil-exporting countries to maintain its fixed currency value following the dramatic decline in the price nigeria oil. Other oil-exporters, such as Angola and Russia, allowed their currency rates to float.
Experts believe that the official exchange rate will settle somewhere between N and N in the new market, although Emefiele wrote in a letter to President Buhari that forex expects the exchange rate to stay closer 2016 N to the dollar. The forex took a predictable dive, of nigeria 23 percentagainst the dollar following the currency float.
One positive effect is that the flotation of the naira will boost exports, as the ensuing devaluation will make Nigerian exports cheaper. The CBN also hopes that the devaluation will ease business transactions for those that have found it difficult to procure foreign currency.
However, a rise in inflation is also expected to accompany the devaluation. At this time, it remains unclear if this policy shift will be accompanied with the easing of other restrictions that forex limited business operations in Nigeria, such as the limitations on repatriation of currency. With the prices of policy goods soaring, individuals and entities still limited in their access to 2016 currency, and the economy 2016 for the first time in more than a decade, the CBN Governor and President Buhari will have nigeria make many more substantial policy changes to battle inflation and recession.
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