Macroeconomic Report & Economic Updates

Nigeria Economic Update (Issue 48)

The World Bank, at the launch of November 2021 edition of Nigeria’s Development Update discussed the state of Nigeria’s economy and made several policy recommendations. One of the notable suggestions was that of fixing the exchange rate policies in the country. According to the report, the existence of parallel rates in the foreign exchange market is one of the drivers of inflation in the country, which has pushed about 8 million Nigerians into poverty since 2020. The bank recommended that to curb inflation in the economy, exchange rate management ought to be predictable and flexible, thus, emphasise the need to have a uniform exchange rate. Given the administrative goal of lifting 100 million Nigerians out of poverty by 2030, it is imperative to address high inflation rate by introducing policies that would bring the rate below a single digit. The unification of the exchange rate might be important in achieving lower inflation by reducing arbitrage in the foreign exchange market. However, persistent shortage of foreign exchange due to low export earnings posits a challenge to effective management of the foreign exchange. Hence, there is a need for the government to support firms operating in the country in terms of simplifying export regulations and making credits available for firms to expand their scale of operation and the quality of their products to gain traction in the global market, thereby increasing export earnings. 

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