International records / International Monetary Fund

Nigeria’s Shift to a Floating Regime: Interest Rate and Exchange Rate Pass-Through and Policy Effectiveness

In June 2023, Nigeria transitioned from a multi-window, managed exchange rate system to a floating regime. This paper examines how the regime change altered the interest rate and exchange rate pass-through (ERPT) using econometrics cointegration methods and a Bayesian VAR estimated over 2007–2025. We show that ERPT is highly shock-dependent. under the pre-unification regime, pass-through was muted or negative, reflecting policy insulation through reserve management and capital controls. Following unification, ERPT becomes positive and economically meaningful - particularly for external financi…