In order to promote investment, the African country has given up control of its currency.
Nigeria’s plan to merge its numerous currency exchange rates may help to stabilise the African country’s shattered economy, but it may also harm entrenched business interests that rely on the previous system to import crucial commodities, economics expert Dahiru Balami told RT on Saturday.
The Nigerian naira touched a record low of 860 per dollar on the black market late last week, a month after the country’s central bank depreciated the currency in an attempt to reduce the gap between the country’s official and unofficial exchange rates. The government thought that by removing its artificially low interest rate, it would increase inward investment and alleviate a foreign currency shortfall.
While the decision has caused a spike in inflation, Professor Dahiru Balami of the University of Maiduguri told RT that this will likely subside when the market establishes the genuine worth of the naira.
Meanwhile, the elimination of the fixed rate, which allowed some enterprises to purchase commodities at a lower cost, will affect industries that have “taken advantage of the multiple rates.”
With “certain economic agents” unable to acquire oil and gas at the central bank’s rate, “critical industries for the country’s development” may be compelled to pay extra for imported commodities, which they will pass on to consumers, he explained.
With petrol and energy prices already rising, the central bank will meet in Abuja on Monday and Tuesday to discuss hiking interest rates.
