Nigeria facing exchange rate turmoil – professor

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Nigeria’s plan to merge its numerous currency exchange rates may help to stabilize the African country’s shattered economy, but it may also harm entrenched business interests that rely on the previous system to import crucial commodities, economist Dahiru Balami told RT on Saturday.

Late last week, the Nigerian naira touched a record low of 860 per dollar on the black market, 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 currency shortage.

While the decision has caused inflation to rise, Professor Dahiru Balami of the University of Maiduguri told RT that this is temporary.

Meanwhile, the elimination of the fixed rate, which allowed some enterprises to purchase goods at a lower cost, will hurt 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 will be passed on to consumers, he explained.

With petrol and energy costs already rising, the Central Bank of Nigeria will meet in Abuja on Monday and Tuesday to consider hiking interest rates.