Squeeze on foreign exchange
Emefiele gave reasons why the naira was devalued. He explained that for Nigeria, an emerging market economy reliant on oil exports, the drop in crude oil earnings and retreat by foreign portfolio investors significantly affected the supply of foreign exchange into the country.
How the naira was devalued?
In 2016, the central bank banned the sale of dollars to exchange bureaux to avoid depleting Nigeria's reserves after a sharp drop in oil prices. The move triggered a 60% fall in the currency on the parallel market and a sharp devaluation on the spot market.
What are the reasons for devaluation?
Below, we look at the three top reasons why a country would pursue a policy of devaluation:
- To Boost Exports. On a world market, goods from one country must compete with those from all other countries. ...
- To Shrink Trade Deficits. ...
- To Reduce Sovereign Debt Burdens.
