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Exchange Rate Unification in Nigeria: Benefits and Implications

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  • Ozili, Peterson K

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.

Suggested Citation

  • Ozili, Peterson K, 2024. "Exchange Rate Unification in Nigeria: Benefits and Implications," MPRA Paper 120441, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:120441
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    References listed on IDEAS

    as
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    6. Aguilar, Javiera & Nydahl, Stefan, 2000. "Central bank intervention and exchange rates: the case of Sweden," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 10(3-4), pages 303-322, December.
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    More about this item

    Keywords

    exchange rate; unification; parallel market; official exchange rate; Nigeria.;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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