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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:The CFAF Devaluation, Naira Parallel Exchange Rate and Niger's Competitiveness
Author:Mamadou, Ousmane SambaISNI
Periodical:Journal of African Economies
Geographic terms:Niger
Subjects:exchange rates
Economics and Trade
External link:https://jae.oxfordjournals.org/content/6/1/85.full.pdf
Abstract:Niger's competitiveness with Nigeria has decreased significantly during the last decade, and the January 1994 devaluation of the CFA franc did not actually result in a sustained real and nominal depreciation of this currency versus the naira in the parallel market. To explain the behaviour of the naira/CFA franc exchange rate, this article develops a simple model built on arbitrage theory, taking into account two main motives for foreign currency (notably US dollar and CFA franc) demand in Nigeria: the import of goods or international transactions motive, and the capital transfer or speculative motive. Econometric analysis shows that the import motive for the demand for hard currency dominates. The CFA franc and the dollar are viewed by Nigerians as very close substitutes, and this continued even after the August 1993 decision of the WAMU (West African Monetary Union) to limit CFA franc convertibility and the 1994 devaluation of the CFA franc. Taking into account the role of the transit of European goods to Nigeria via such CFA countries as Niger, the author then uses these econometric results to explain the weak competitiveness of Niger's economy. Bibliogr., notes, sum.