The Central Bank of Nigeria (CBN) has reportedly instructed Deposit Money Banks to allow the naira to freely float against major international currencies, including the US dollar.
This move comes in response to the naira’s recent trading range of N730 to N755 per dollar at the Investors and Exporters (I&E) window on Wednesday.
While an official statement from the central bank is yet to be released, reports from individuals who participated in Foreign Exchange trading on Wednesday, including bankers and customers, shows that the naira is currently being exchanged within the range of N730 to N750.
It is worth noting that this decision comes just two weeks after President Bola Tinubu emphasized his commitment to unifying exchange rates and eliminating fuel subsidies in his inauguration speech on May 29, 2023.
President Tinubu said, “Monetary policy needs a thorough housecleaning. The Central Bank must work towards a unified exchange rate, “This will direct funds away from arbitrage into meaningful investment in the plant, equipment, and jobs that power the real economy.”
Despite the Central Bank of Nigeria (CBN) denying on June 1, 2023, that it had not devalued the naira to approximately 630 naira to a dollar, the recent developments indicate otherwise. These developments have occurred following the suspension of Godwin Emefiele as the CBN Governor last Friday, followed by his arrest by the Department of State Services on Saturday.
The significance of these developments is that participants in the official foreign exchange (FX) market are now permitted to quote their preferred rates, in contrast to the previous practice where the CBN dictated the rates. The new rate of N755/$1 reflects a decline of over 20% in the value of the naira compared to the previous rate of N463/$. Consequently, the naira is currently at parity with the dollar both at the I&E window and in the black market.
