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Nigeria’s devaluation won’t fix managed-float woes

By David Whitehouse
Posted on Monday, 7 June 2021 16:20, updated on Tuesday, 8 June 2021 13:29

NAIRA
REUTERS/Afolabi Sotunde

Nigeria’s naira devaluation in May is unlikely to be the last and won’t fix the chronic dollar shortage which hampers the economy.

In May, the central bank merged the official fixed rate of N379 ($0.92) to a dollar with the investors and exporters (I&E) exchange rate, effectively devaluing the currency by 7.6% against the US dollar. Central Bank Governor Godwin Emefiele says the new unified rate will still work as a managed float.

The naira has continually lost value over the last decade through a myriad of currency regimes. The official rate dropped from 157 to the dollar in 2011, to 412 in May this year; which means the currency has lost more value in the last decade than South Africa’s, Egypt’s, Indonesia’s and Malaysia’s, according to research from FSDH Merchant Bank in Lagos.