Abuja, Nigeria – (African Boulevard News) – In a bid to stabilize its economy, the Central Bank of Nigeria (CBN) has allowed market forces to determine the exchange rate of the naira currency. Following the announcement, the value of the naira plummeted to a record low of 755 Naira per 1 U.S. dollar on Wednesday, but has since bounced back.
The move by the CBN is aimed at gradually unifying the multiple exchange rates and ensuring a more efficient allocation of foreign exchange resources. The new policy puts an end to the official exchange rate of 410 naira per dollar, which had been used by the government to subsidize certain imports.
According to the CBN governor, Godwin Emefiele, the decision was taken in response to the impact of the COVID-19 pandemic on the economy and the need to eliminate the distortions in the foreign exchange market. He stated that the move would improve liquidity in the foreign exchange market and attract more foreign investment into the country.
“This will improve confidence and attract capital inflows into the country, creating more opportunities for Nigerians,” Emefiele said.
However, some economists have expressed concerns that the new policy could lead to higher inflation and hurt the purchasing power of Nigerian consumers. They argue that the devaluation of the naira will make imports more expensive, leading to higher costs of goods and services.
“The policy shift may lead to inflationary pressures on the economy, particularly in the short term. The prices of imported goods, including petroleum products, will rise, which will ultimately lead to higher domestic prices,” says Professor Ndubuisi Nwokoma, an economist at the University of Lagos.
Despite the concerns, some experts say the move was a bold step towards reviving Nigeria’s economy, which has been struggling due to low oil prices and the impact of the pandemic. The country’s economy last year contracted by 1.92%, the worst recession in decades.
“The CBN has done the right thing by allowing market forces to determine the exchange rate. This will attract more foreign investment and improve the country’s economic outlook,” says Bismarck Rewane, an economist and CEO of Financial Derivatives Company.
As Nigeria seeks to attract more foreign investment, the new policy could be a game-changer for the country’s economy. However, it remains to be seen how the market will respond to the new policy and the impact it will have on the purchasing power of Nigerian consumers.
In conclusion, the Central Bank of Nigeria’s decision to let market forces determine the exchange rate of the naira currency is a bold step towards reviving the country’s economy. Although concerns have been raised about the potential impact on inflation and the cost of goods and services, some experts say the move could attract more foreign investment and improve the country’s economic outlook. As Nigeria navigates the challenges of the COVID-19 pandemic and low oil prices, the new policy could be a game-changer for the country’s economy.
