Nigeria’s Currency Depreciation and Potential Abandonment of Exchange Rate Policy
– Nigeria’s currency, the naira, has reached a new low of NGN950:USD1, as the country continues to face shortages of the greenback on both formal and informal markets.
– Economic commentators predict further depreciation of the naira in the coming weeks.
– The Central Bank of Nigeria’s acting governor, Folashodun Shonubi, argues that the naira is undervalued and cites economic modeling using purchasing power parity to support this claim.
– Shonubi identifies diaspora remittances being channeled away from the formal foreign exchange market and “illegal” dollar sales by Nigerian banks as reasons behind the naira’s poor performance.
– The International Monetary Fund (IMF) blames Nigeria’s “loose” fiscal and monetary policies for the depreciation of the naira, suggesting that tightening policies could help stabilize the currency.
Closing: Nigeria’s currency, the naira, is facing significant depreciation due to limited access to the greenback and alleged illegal activities by Nigerian banks. The country’s central bank argues that the naira is undervalued, but the International Monetary Fund suggests that tightening fiscal and monetary policies could be a solution. As Nigeria navigates its currency challenges, it will be crucial for the government and financial institutions to address issues related to foreign exchange availability and regulate banking practices to stabilize the naira.