Nigeria’s foreign exchange reforms have restored the effectiveness of monetary policy after years of distortions under a multiple exchange rate regime, while making currency movements a more important driver of inflation, according to the International Monetary Fund (IMF).
In a Selected Issues Paper accompanying its latest Article IV consultation on Nigeria, the IMF said the June 2023 unification of the foreign exchange market and the subsequent transition to a floating exchange rate regime marked a fundamental shift in the country’s economic policy framework.
The reforms ended a decades-long system characterised by multiple exchange rates, administrative controls and persistent gaps between official and parallel market rates, allowing the naira to trade more freely and strengthening the transmission of monetary policy decisions through the financial system.
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“The June 2023 unification reform marked a fundamental shift in the exchange rate framework, culminating in the transition toward a floating arrangement by 2024,” the IMF said.
