Exchange rate, Exchange rate management, Nominal Exchange Rate, Exchange rate policy


The exchange rate is a key macroeconomic variable in the context of general economic policy making, and of economic reform programmes, in particular. It is a very important price which governments take very active interest in. However, two concepts of exchange rate are commonly distinguished: nominal exchange rate and real exchange rate. - The nominal exchange rate (NER) is a monetary concept which measures the relative price of two moneys or currencies, e.g., Naira in relation to the U. S dollar. - But the real exchange rate (RER), as the name implies, is a real concept that measures the relative price of two goods-tradable goods (exports and imports) in relation to non-tradable goods (goods and services produced and consumed locally). This paper is on nominal exchange rate management from 1986 when the structural adjustment programme (SAP) was introduced and a new exchange rate policy, different from the previous system of adjustable peg, was introduced. The CBN should continue to intervene in the foreign exchange market to maintain stability. Finally, the exchange rate is important as a major price that affects all sectors of the economy and all economic agents. And the nominal exchange rate affects the real exchange rate. It is thus desirable to monitor the movements in the rates so as to foster competitiveness and improve the supply of exportable.

Author Bio

The author is a staff of University of Benin, Benin City, Nigeria.

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