Nigeria’s decision to float its currency, the naira, has significant implications for the country’s economy and its citizens.
According to TechPoint Africa, the move by the federal government allows banks and other forex players to trade freely, which means that the value of the naira will be determined by market forces rather than being fixed by the government. As of the time of writing this article, the exchange rate stands at ₦664/$1.
For Individuals And Businesses
For individuals and businesses that rely on imports or exports, the floating of the naira means that they will be able to access foreign currency more easily.
This is because the market forces of supply and demand will determine the exchange rate, rather than a fixed government rate that may not accurately reflect the true value of the currency.
However, this also means that the value of the naira may fluctuate more rapidly, which could make it more difficult to plan for future business expenses.
For banks, the floating of the naira creates new opportunities for profit and risk. Banks can now participate in the foreign exchange market and earn revenue from trading foreign currencies. However, the floating of the naira also means that banks will need to manage the risk of exchange rate fluctuations, which could affect the value of their foreign currency holdings.
For fintech companies, the floating of the naira presents both opportunities and challenges. Fintechs that specialize in foreign exchange services may benefit from increased demand for their services.
However, the floating of the naira could also make it more difficult for fintechs to offer competitive exchange rates, as the market will be more competitive and pricing will be determined by market forces.
Overall, the floating of the naira is a significant economic policy shift for Nigeria. While it presents opportunities for increased trade and investment, it also comes with risks and challenges that will need to be carefully managed by businesses and policymakers alike.
By Elijah Christopher