Exchange Rate Unification in Nigeria: Benefits and Implications

Ozili, Peterson K (2024): Exchange Rate Unification in Nigeria: Benefits and Implications. Published in:

Abstract

This paper explores the recent unification of exchange rate in Nigeria. Recently, Nigeria unified the exchange rate and adopted an imperfect free float exchange rate system that is based on the willing buyer willing seller principle. The exchange rate regime is slightly close to a free float exchange rate system. Multiple factors led to exchange rate unification in Nigeria such as exchange rate price arbitrage and the market distortion it created. The unification of exchange rate is expected to yield potential benefits such as fewer government intervention in the foreign exchange market, improve price discovery, greater foreign exchange supply, higher capital importation, reduction in budget deficit, increased investor confidence, improved sovereign credit rating, increased transparency in the foreign exchange market, improved business environment and greater competition. Adverse effects are expected in the short-term, but these effects will dissipate in the medium to long-term.

• Item Type: MPRA Paper
• Language: English
• Keywords: exchange rate, unification, parallel market, official exchange rate, Nigeria.
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; F - International Economics > F3 - International Finance > F31 - Foreign Exchange

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