Amidst high expectations that Nigeria’s ailing economy will recover, the Manufacturers Association of Nigeria (MAN) has predicted what the adoption of a floating exchange rate regime will yield mixed impact on the economy.
The Director General of MAN, Segun Ajayi-Kadir, explained that many factors determine the market forces of a floating exchange rate regime.
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Segun Ajayi-Kadir,
The D.G. said factors like commodity prices, capital flows, and level of trade flow will determine the exchange rate level.
Countries that had practised floating exchange rates include the United States of America, Canada, Japan, United Kingdom, Angola and Egypt in Africa.
Ajayi-Kadir noted that the outcome of the policy was often mixed, as observed in the highlighted countries.
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Also, he was quick to say that the impact on the Nigerian economy would definitely no be different.
Benefits To Manufacturers
On the good side, Ajayi-Kadir said that this policy would lead to the deceleration of foreign exchange scarcity as currency arbitrage activities would drop.
He added that the policy would foster competitiveness of Nigeria’s export and lead to improved market efficiency for effective foreign exchange.
Challenges To Manufacturers
On the challenges that may arise, from the just adopted exchange rate policy, he said: we expect increased import costs and currency depreciation may reduce import flows, and this is bad for manufacturers.
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“We foresee economic uncertainties and exchange rate volatility due to the difficulty in predicting future exchange rate movements.
