The Central Bank of Nigeria (CBN) made a declaration on Oct. 12, lifting the foreign exchange constraints initially placed on the importation of 43 items. This move comes as a part of the bank's broader objective of unifying the local currency's multiple exchange rates and controlling inflation.
Background: The Foreign Exchange Restrictions
The foreign exchange restrictions were first imposed on June 23, 2015. The CBN stated that these measures were compelling importers to acquire the scarce resources on the parallel market. The local currency had traded at just under N500 per dollar for more than a year before Nigerian President Bola Tinubu's foreign exchange market reforms.
The Impact on the Parallel Market
On the parallel market where the US dollar was and still is widely available, importers were obliged to pay premiums starting from 20% to obtain U.S. dollars. At the time, several experts on the Nigerian economy argued that the official exchange rate was significantly overvaluing the local currency. Some even urged the central bank to depreciate the naira-to-dollar exchange rate, but this proposal was rejected.
Policy Change: Abandoning the Fixed Exchange Rate Regime
Following his inauguration as Nigeria’s new leader, Tinubu reportedly directed the CBN to discard the fixed exchange rate regime. According to a statement from the bank, the restrictions were compelling importers into the parallel market and contributing to an excess demand for forex. This led to a weakening of the parallel-market exchange rate, which in turn increased prices.
Implications of Lifting the Restrictions
The central bank, currently headed by Olayemi Michael Cardoso, stated that the growing discrepancy between the official and parallel market exchange rate could suggest that the rate "has not been setting a clearing price." The bank believes that by eliminating restrictions, it will not only promote "orderliness and professional conduct" but also ensure market forces determine the exchange rate.
Benefits for Local Producers and Consumers
The CBN also indicated that the removal of the restrictions would favour local producers in the form of cheaper imported inputs. Additionally, consumers are expected to "benefit from cheaper retail products." The bank also asserts that this policy shift will result in the reopening of closed factories.
Conclusion
As the Central Bank of Nigeria embarks on this new course, the country waits to see the potential long-term benefits. This significant policy adjustment could mark the start of a promising era for the Nigerian economy.
Frequently Asked Questions
What is a Precious Metal IRA and How Can You Benefit From It?
A precious metal IRA allows for you to diversify your retirement savings in gold, silver, palladium and iridium. These precious metals are extremely rare and valuable. These are excellent investments that will protect your wealth from inflation and economic instability.
Precious metals are often referred to as “bullion.” Bullion refers to the actual physical metal itself.
Bullion can be bought via various channels, such as online retailers, large coin dealers and grocery stores.
A precious metal IRA lets you invest in bullion direct, instead of purchasing stock. This will ensure that you receive annual dividends.
Precious metal IRAs are not like regular IRAs. They don't need paperwork and don't have to be renewed annually. Instead, you pay only a small percentage tax on your gains. Additionally, you have access to your funds at no cost whenever you need them.
How Much of Your IRA Should Be Made Up Of Precious Metals
When investing in precious metals, the most important thing to know is that they aren't just for wealthy people. You don't need to be rich to make an investment in precious metals. There are many ways to make money on silver and gold investments without spending too much.
You might also be interested in buying physical coins, such bullion rounds or bars. It is possible to also purchase shares in companies that make precious metals. Your retirement plan provider may offer an IRA rollingover program.
You will still reap the benefits of owning precious metals, regardless of which option you choose. They offer the potential for long-term, sustainable growth even though they aren’t stocks.
Their prices are more volatile than traditional investments. If you decide to make a sale of your investment in the future, you will likely realize more profit than with traditional investments.
Is buying gold a good option for retirement planning?
Although gold investment may not seem appealing at first glance due to the high average global gold consumption, it's worth considering.
Physical bullion is the most popular method of investing in gold. There are many ways to invest your gold. It is best to research all options and make informed decisions based on your goals.
If you're not looking to secure your wealth, it may be worth considering purchasing shares in mining equipment or companies that extract gold. If you need cash flow from an investment, purchasing gold stocks is a good choice.
You can also put your money in exchange traded funds (ETFs). These funds allow you to be exposed to the price and value of gold by holding gold related securities. These ETFs can include stocks of precious metals refiners and gold miners.
What precious metal should I invest in?
This question depends on how risky you are willing to take, and what return you want. Gold has been traditionally considered a haven investment, but it's not always the most profitable choice. Gold may not be right for you if you want quick profits. If you have the patience to wait, then you might consider investing in silver.
If you don't care about getting rich quickly, gold is probably the way to go. Silver might be a better investment option if steady returns are desired over a long period of time.
Statistics
- If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
- This is a 15% margin that has shown no stable direction of growth but fluctuates seemingly at random. (smartasset.com)
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
- The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (aarp.org)
External Links
investopedia.com
irs.gov
law.cornell.edu
- 7 U.S. Code SS7 – Designation boards of trade as contract market authorities
- 26 U.S. Code SS 408 – Individual retirement accounts
bbb.org
How To
Investing in gold or stocks
These days, it might seem quite risky to invest your money in gold. This is because many people believe that gold investment is no longer profitable. This belief arises because most people believe that the global economy is driving down gold prices. They feel that gold investment would cause them to lose money. In reality, however, there are still significant benefits that you can get when investing in gold. Let's take a look at some of the benefits.
The oldest form of currency known to mankind is gold. It has been in use for thousands of year. It has been used as a store for value by people all over the globe. It continues to be used in South Africa, as a way of paying their citizens.
You must first decide how much you are willing and able to pay per gram to decide whether or not gold should be your investment. It is important to determine the price per gram you are willing and able to pay for gold bullion. If you don't know your current market rate, you could always contact a local jeweler and ask them what they think the price is.
Noting that gold prices have fallen in recent years, it is worth noting that the cost to produce gold has gone up. The price of gold may have fallen, but the production costs haven’t.
Another thing to remember when thinking about whether or not you should buy gold is the amount of gold you plan on purchasing. It is sensible to avoid buying gold if you are only looking to cover the wedding rings. But, if your goal is to make long-term investments in gold, this might be worth considering. It is possible to make a profit by selling your gold at higher prices than when you purchased it.
We hope this article has given you an improved understanding of gold investment tools. We recommend you do your research before making any final decisions. Only after you have done this can you make an informed choice.
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By: Terence Zimwara
Title: Central Bank of Nigeria Lifts Foreign Exchange Restrictions: A Step Towards Economic Progress
Sourced From: news.bitcoin.com/nigerian-central-bank-lifts-forex-restrictions-on-43-items-market-forces-to-determine-exchange-rate/
Published Date: Sun, 15 Oct 2023 07:30:06 +0000
