Prices of imported goods will increase in local currency in Nigeria while imports are expected to become cheaper.  

Nigeria’s currency, the Naira, has been floating since June 20, 2016. The country opted for a floating exchange rate against the hitherto fixed regime amidst falling global oil prices and depleting foreign reserves.  

Thisday newspaper reports that it is apparent that the parallel exchange rate of the Naira is driven by oil price, given that it accounts for 70 to 80 percent of government revenues and the lion’s share of Nigeria’s exports. The country had taken steps to ration foreign exchange instead of letting the market determine exchange rate after oil prices began their most recent fall. By April 2015, when the Central Bank of Nigeria reintroduced foreign exchange rationing with restrictions on credit cards, the Dollar oil price had fallen some 40 percent from its peak in June 2014.

The official Naira-Dollar exchange rate had depreciated by 21 percent over this period, to 197 Naira per Dollar from 162.8 naira per dollar. In June, the Central Bank of Nigeria declared 40 imported items as “not valid for foreign exchange in the Nigerian foreign exchange markets” purportedly to “conserve foreign exchange reserves as well as facilitate the resuscitation of domestic industries and improve employment generation.” The items range from toothpicks to private airplanes and jets.

Experts posit that devaluating a currency is only decided by the government, issuing the currency as a means of combating trade imbalances, a case in point is Nigeria’s naira. The country’s exports will now become less expensive, making them more competitive on the global market. This equally means that imports will remain expensive, making domestic consumers less likely to purchase them.  

Economists blame the policy, stressing that it discourages foreign investments and creates a crippling shortage of Dollars in a country that brings in most finished goods from abroad. Inflation soared to a near-four-year high of 12.8 percent in March as manufacturers struggled to pay for imported goods. Growth is set to slow to 2.3 per cent this year, the lowest since 1999, in large part because of the capital control, notes the International Monetary Fund.