Bitcoin News and Finance
New World Bank Report: Nigeria’s Exchange Rate Policies Fueling Inflation, Affecting Food Prices Skip to main content

New World Bank Report: Nigeria’s Exchange Rate Policies Fueling Inflation, Affecting Food Prices

Nigeria’s use of multiple exchange rates regimes may have contributed to a rise in the country’s 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 “further pushing up prices of food and agricultural inputs like fertilizer.”

Misaligned Exchange Rates

In a report that focuses on the country’s inflation trends, the global lender bemoans Nigeria’s reluctance to move the official exchange rates in tandem with the naira’s depreciation. The report explains:

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.

As previously reported by Bitcoin.com News, Nigeria recently devalued the naira’s 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.

New World Bank Report: Nigeria's Exchange Rate Policies Fueling Inflation, Affecting Food Prices

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:

“When 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.”

Inconsistent CBN Policies Attacked

The same report also cites the Central Bank of Nigeria (CBN)’s monetary policy which it says is “not consistent with prioritizing efforts to curb inflation.” The report asserts that the tools used by the CBN to achieve its policy goals “sometimes contradict each other.” 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.

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 — now the anchor rate for all formal foreign exchange transactions — more flexible in order to reduce real exchange rate misalignments. A more flexible rate could also boost Nigeria’s competitiveness, and narrow the spread between the NAFEX rate and the parallel market rate, with a positive effect on inflation dynamics.

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.

Labels:

Comments

Post a Comment

Popular posts from this blog

Custodial Lightning Network Service Attack Discovered by LN ‘Newbie’ — Hacker Strikes 6 LN Custodians

On September 18, a Redditor posted to the r/bitcoin forum and explained how he discovered a way to “attack [the] lightning Network’s custodial services.” The Reddit account dubbed “Reckless Satoshi” wanted to figure out if a “discrepancy between real routing fees and service’s transaction fee can be exploited for a profit.” The researcher disclosed that he wanted to see how large the damage could be and said “it is bad.” 6 Lightning Network Custodial Services Attacked, Researcher Discloses Findings to Offenders Prior to Public Disclosure A Redditor called Reckless Satoshi published a disclosure post on r/bitcoin this past Saturday and disclosed how he had found a vulnerability with routing fees and some of the Lightning Network’s custodial services. The research attack was done in good faith and after it was complete he disclosed the bugs to the offending services before publishing his findings. Reckless Satoshi used the Lightning Network (LN) attack on six different services incl...
Post a Comment
Read more

Axie Infinity Down 40% Since Last Week’s Price High, Protocol Revenue Outshines Competitors

Last week, the game token leveraged within the Axie Infinity gaming universe skyrocketed to all-time highs, while other crypto markets remained extremely lackluster. During the last seven days, Axie Infinity’s platform token has dropped significantly in value shedding more than 12%. Meanwhile, the game platform’s smooth love potion token has slid over 8% over the last 24 hours. Axie Infinity Down More Than 40% Since All-Time High Not too long ago, the axie infinity (AXS) token was a topical conversation because it reached an all-time high on July 15. At the time, AXS managed to capture $28.93 per unit and since then it has shed 12.8% during the last seven days. The axie infinity (AXS) token is used within the blockchain-based game that involves battles between token-based creatures called “Axies.” AXS is used for the game’s governance system as well as other actions within the game. At the time of writing axie infinity (AXS) is exchanging hands for $16.70 per coin. AXS/USD on Ju...
Post a Comment
Read more

Play-to-Earn Game From Polker (PKR) Exchange Listing – Endorsed by Akon

The Play-to-Earn NFT based Polker.Game ‘s native token $PKR has been officially listed on the popular centralized exchange BitMart. Polker.game has been in the spotlight recently as Akon, the American R&B superstar and record producer gave his official endorsement of polker stating that the “game is revolutionary” and that Polker is “hands down.. the best play to earn, NFT game in the space.”. With the BitMart listing and celebrity endorsement from Akon, Polker is perfectly positioned to become a major player in the Play-to-Earn league. Watch Akon’s Video Here What is Play-to-Earn? Although not a new concept, play-to-earn has become a trending term due to the popularity of the NFT game AXIE infinity. In the past, previous play-to-earn games have also achieved success – however, thanks to the huge amount of development in the blockchain space in recent years the gaming experience is now massively improved. Play-to-Earn games are essentially free to play and open to anyone and...
Post a Comment
Read more

China to Crack Down on Copyright Infringement Through NFTs

Authorities in China are going after creators of digital collectibles based on other people’s works of art, the use of which was not authorized. The government offensive is part of a campaign to combat online copyright infringement and piracy with the participation of several departments. Regulators in China Move to Strengthen Copyright Supervision of Online Platforms The National Copyright Administration of China (NCAC) has recently launched a campaign against copyright infringement and piracy on the internet, together with the Ministry of Industry and Information Technology, the Ministry of Public Security, and the State Internet Information Office of the People’s Republic. A major objective of the initiative is to improve copyright supervision of online businesses by investigating cases involving the sale and distribution of infringing products on short video, live broadcast and e-commerce platforms, and promptly dealing with infringing content, the agency announced in a press r...
Post a Comment
Read more
Blogarama - Blog Directory