Nigeria has technically devalued the naira at the Investors and Exporters (I&E) trading window from N366.70 to N380.20.
Dollars sold to foreign portfolio investors at 380 naira official exchange rate allowed weakening to market rate.
This moved has indicated that the Nigeria’s central bank will migrate to a single exchange rate for the naira by collapsing the multiple exchange rate policy that determined the value for the local currency, people with direct knowledge of the matter said.
“Today Friday CBN allowed the rate at the importer and exporters (I&E) window to adjust in response to market developments,” said a senior central bank official, confirming the bank changed the rate at the window for foreign investors to 380 naira per dollar from 366 naira per dollar.
Other source noted that this is a big step forward if it means a convergence of all existing rates as it removes the opaqueness of Nigeria’s foreign exchange policy
The move is expected to sustain foreign portfolio investors’ interest in Nigeria’s financial instruments.
Nigeria like other countries mainly dependent on crude oil to fund expenditures have been under tremendous pressure since the price of the commodity crashed from $67pb to about $27pb.
The CBN still operates multiple exchange rate windows, the source added. The CBN’s website has N307-$1 as the official rate, while it still sells to licensed changers at somewhere around N357-$1.
The Amehnews recall that CBN has been operating a system of multiple exchange rates in a bid to control demand for dollars. The system, which has been criticized by the International Monetary Fund, has kept the official rate at about 307 naira per dollar. It uses this to supply cheap foreign exchange to government departments and select companies, including fuel importers. It created an importers and exporters window in 2017, in which the naira was allowed to weaken after an economic contraction in 2016.
There has long been a consensus among essentially everyone other than the central bank that their multiple rate exchange system was inefficient and unnecessarily complex.
The central bank has also allowed the official rate, which was pegged at 307 naira to the dollar to weaken closer to the market rate. Government dollar earnings from oil will now be converted to naira at the higher rate, a huge boost to revenues which has been hit by lower crude prices.
