In Nigeria, the central bank has ended foreign exchange market segmentation meaning the naira will now be traded at market rates instead of fixed against the US dollar and other currencies.
This decision, favorably received by Nigerians, comes five days after the suspension and then arrest of the former director of the CBN, Godwin Emefiele.
Until now, several exchange rates were applied depending on the sectors on which the transactions concerned. These announcements from the central bank caused a devaluation of almost 40% of the naira, the currency has since recovered.
According to analysts, this unification of the exchange rate should stimulate money inflows and help stabilize an economy damaged by galloping inflation and a record unemployment rate.
"We had difficulty finding US dollars simply because the Central Bank of Nigeria only supplied them to exporters, used them to pay medical bills, business travel...To get around this problem, you had to source from the markets, you need dollars, go to the market, and whereas in the markets, it is the law of supply and demand that determines the price" explains Sam Chidoka, CEO of Kairos Capital.
Additionally, these measures experts warn will impact the prices of imported products, 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 an increase in the total debt-to-GDP ratio.
