AN ASSESSMENT OF THE IMPLICATION EXCHANGE RATE POLICY REFORM OF UNIFICATION AND MARKET LIBERALIZATION ON THE VALUE OF NIGERIAN CURRENCY

Abstract

In May 2023, Nigeria introduced a foreign exchange policy reform called Unification and Market
Liberalization which aimed at unifying the multiple exchange rate system and currency stability.
However, while the immediate impact was a weaker naira, it is imperative to excavate the previous
exchange rate policy reforms in Nigeria, to find out the challenges impinging the reforms and the
implication of the reform on the value of Nigerian currency. The study is literature-based research
which hinges on the qualitative method of data collection. Secondary data, notably, books,
journals, periodicals and internet materials were extensively utilized. The study adopted the
Monetary Model of Exchange Rate Determination as the theoretical framework. Findings from
this research reveal that the reform encountered numerous challenges due to the complex interplay
of domestic and global factors. These challenges include macroeconomic instability, dollar
scarcity, multiple foreign exchange systems, inconsistent policy implementation, feebleness of the
Nigerian economy and political interference. These challenges have influenced the
implementation and effectiveness of the reforms which implicate the value of Nigerian currency in
the following areas: Naira depreciation, inflationary pressure, loss of investors’ confidence, loss
of gain on external trade and pressure on foreign reserve. Therefore, strengthening foreign
reserves, economic diversification, inflation control, export promotion and addressing economic
issues were recommended.