The major purpose of this article is to investigate the impact of the U.S. dollar exchange rate on the Nigerian economy between 2001 to 2022.
An economy’s exchange rate reflects the ratio at which one currency can be exchanged for another, i.e., the ratio of currency prices. In other words, an exchange rate specifies how much one currency is worth in terms of another. A good exchange rate has always been one of the most important reasons why the economies of many developed countries have grown over time. In contrast, regular fluctuations or inappropriate exchange rates have been one of the major obstacles to the economic growth of many African countries, including Nigeria.
In Nigeria today, the constant movement of the dollar rate or exchange rate is of great importance to the economy and the general public because, one way or another, fluctuation harms the competence of the economy to reach the optimal capacity of productivity. Sometimes people ask questions like, will the dollar rate increase next week?
Nigeria uses two basic types of exchange rates, namely: the official exchange rate and the market exchange rate.
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- The official exchange rate is usually determined by the Central Bank or monetary authority
- The market exchange rate is usually determined by the market forces of demand and supply
According to the apex bank, these exchange rates were created because they were necessary for a single economy like Nigeria battling a crisis.
The dollar rate can either have a negative impact or a positive impact on the Nigeria economy based on the following:
- There is a negative impact of the dollar rate on the Nigerian economy when there is a fluctuation in the dollar-to-naira exchange rate or when there is a reduction in the exchange rate of naira, which can lead to instability in the economy.
- There is a positive impact of the dollar rate on the Nigerian economy when the exchange rate from dollar to naira is constant or when there is an increase in the exchange rate of naira, which leads to productivity and stability in the economy.
Sometimes, we ask ourselves, “What happens when the dollar exchange rate increases?” Between 2001 – and 2022, Nigeria experienced a constant fluctuation in the exchange rate, which has been one of the major obstacles to Nigeria’s economic growth, has harmed Nigerian competence, has reduced productivity in the economy and has also led to a crisis in the economy.
The table below shows the value of one U.S. dollar exchange rate in the Nigerian naira between 2001 and 2022.
Note: PM = Parallel Market or Black Market Rate
|Year||Naira (₦) Per USD ($)|
|2001||99–106 (104–122 PM)|
|2002||109–113 (122–140 PM)|
|2003||114–127 (135–137 PM)|
|2004||127–130 (137–144 PM)|
|2016||390–489 (310-N370 PM)|
|2022||415.42 (January 22) (Buying Rate: 570, Selling Rate: 575 – PM)|
In conclusion, the Nigerian government should put more effort into maintaining a stable and sustainable exchange rate, as the stability of this rate enhances the economy’s industrial output and, in other words, improves economic growth. Doing so will help solve problems that have to do with why the dollar rate went up today. In addition, there should be an increase in the exchange rate of the naira to increase economic growth and development. The interest rate should be minimal to increase the average Nigerian’s purchasing power.