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Nigeria devalues the naira

The central bank of Nigeria, having operated a multiple-exchange-rate system during the last few years, on Friday devalued the official rate by 15%, effectively unifying all rates.

The dollar-pegged official rate was devalued from USD 1 / NGN 306 to USD 1 / NGN 360, bringing it into line with parallel market rates. While the change will affect prices of imported fuel (although any rise will be more than offset by recent falls), importers of other goods have already been relying on the parallel market to obtain their foreign currencies since Nigeria last revamped its exchange-rate system in 2017.

International assignees working in Nigeria, whose employers are clients of ECA, will also have had their cost-of-living indices based on parallel-market currency values since 2017, so they should experience little change after the latest reform.

Maintaining an overvalued exchange rate is costly for a central bank in terms of the foreign currency it has to constantly sell in exchange for the local currency whose value it needs to uphold. Nigeria's foreign-currency reserves have recently been severely threatened by the collapse in the price of oil, Nigeria's dominant export, after Saudi Arabia launched its oil-price war two weeks ago.

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