{"id":8550,"date":"2021-06-21T11:54:30","date_gmt":"2021-06-21T11:54:30","guid":{"rendered":"https:\/\/www.buyucoin.com\/crypto-labs\/new-world-bank-report-nigerias-exchange-rate-policies-fueling-inflation-affecting-food-prices\/"},"modified":"2021-06-21T11:54:30","modified_gmt":"2021-06-21T11:54:30","slug":"new-world-bank-report-nigerias-exchange-rate-policies-fueling-inflation-affecting-food-prices","status":"publish","type":"post","link":"https:\/\/www.buyucoin.com\/crypto-labs\/new-world-bank-report-nigerias-exchange-rate-policies-fueling-inflation-affecting-food-prices\/","title":{"rendered":"New World Bank Report: Nigeria\u2019s Exchange Rate Policies Fueling Inflation, Affecting Food Prices"},"content":{"rendered":"

Nigeria\u2019s use of multiple exchange rates regimes may have contributed to a rise in the country\u2019s inflation rate, the latest World Bank report has said. In addition, the report says ongoing restrictions on the use and movement of foreign exchange are \u201cfurther pushing up prices of food and agricultural inputs like fertilizer.\u201d <\/strong><\/p>\n

Misaligned Exchange Rates<\/h2>\n

In a report<\/a> that focuses on the country\u2019s inflation trends, the global lender bemoans Nigeria\u2019s reluctance to move the official exchange rates in tandem with the naira\u2019s depreciation. The report explains:<\/p>\n

Even though the nominal Investors and Exporters Foreign Exchange window [IEFX] exchange rate has been depreciating, which has helped to alleviate inflationary pressures, it has not been doing so fast enough to equilibrate the FX market.<\/p>\n

As previously reported<\/a> by Bitcoin.com News, Nigeria recently devalued the naira\u2019s exchange rate to the current N411 for every US dollar. However, this new rate still falls short of the parallel market rate of over N490 for every dollar.<\/p>\n<\/p>\n

It is this disequilibrium between the official and the parallel market rates which the World Bank blames for helping cause an upswing in inflationary pressures. The report continues:<\/p>\n

\u201cWhen there is a divergence between the official\/IEFX rate and the parallel FX rate, the parallel rate is the one most associated with food price dynamics. Unable to access FX in the IEFX window, businesses seek it through the parallel market and other alternative sources and factor in the parallel rate in business decisions, so that it eventually passes through to market prices for goods and services.\u201d<\/p>\n

<\/p>\n

Inconsistent CBN Policies Attacked<\/h2>\n

The same report also cites the Central Bank of Nigeria (CBN)\u2019s monetary policy which it says is \u201cnot consistent with prioritizing efforts to curb inflation.\u201d The report asserts that the tools used by the CBN to achieve its policy goals \u201csometimes contradict each other.\u201d For example, keeping the exchange rate stable or fixed promotes growth and helps to contain inflation. However, the same policy weakens the effectiveness of monetary transmission mechanisms to contain inflationary pressures.<\/p>\n

Meanwhile, the World Bank (as part of its many recommendations) wants the West Africa country to make the Nigeria Autonomous Foreign Exchange (NAFEX) exchange rate \u2014 now the anchor rate for all formal foreign exchange transactions \u2014 more flexible in order to reduce real exchange rate misalignments. A more flexible rate could also boost Nigeria\u2019s competitiveness, and narrow the spread between the NAFEX rate and the parallel market rate, with a positive effect on inflation dynamics.<\/p>\n

Do you believe that it is still possible for Nigeria to significantly narrow the official and parallel market exchange rates? Tell us what you think in the comments section below. <\/strong><\/em><\/p>\n

Bitcoin News
\nEconomics, Central Bank of Nigeria, Foreign exchange, inflation, Monetary Policy, naira devaluation, naira exchange rate, parallel market, World Bank<\/p>\n","protected":false},"excerpt":{"rendered":"

Nigeria\u2019s use of multiple exchange rates regimes may have contributed to a rise in the country\u2019s inflation rate, the latest World Bank report has said. In addition, the report says ongoing restrictions on the use and movement of foreign exchange are \u201cfurther pushing up prices of food and agricultural inputs like fertilizer.\u201d Misaligned Exchange Rates…<\/p>\n","protected":false},"author":0,"featured_media":8551,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[53,3],"tags":[],"class_list":["post-8550","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blockchain-news","category-coin-news"],"_links":{"self":[{"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/posts\/8550"}],"collection":[{"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/comments?post=8550"}],"version-history":[{"count":0,"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/posts\/8550\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/media\/8551"}],"wp:attachment":[{"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/media?parent=8550"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/categories?post=8550"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/tags?post=8550"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}