…US dollar official rate now N411
The Central Bank of Nigeria, (CBN), yesterday began gradual harmonisation of exchange rates with the removal of N379/$1 official rate from its website.
The move by the apex bank is one of the first indications of exchange rate harmonisation and tactical devaluation of the naira.
Speaking at the 55th Annual Bankers’ Dinner in Lagos, the CBN boss said the need to adjust for the decrease in the supply of foreign exchange led to the depreciation of the naira.
Emefiele said that in Nigeria, like other emerging market countries and countries reliant on oil exports, the decline in crude oil earnings, as well as the retreat by foreign portfolio investors, significantly affected the supply of foreign exchange into Nigeria.
The policy shift also confirmed longtime speculation that the Nigerian Autonomous Foreign Exchange Rate (NAFEX), also called the Investors’ and Exporters’ forex window, is the default official rate.
Emefiele further explained that due to the unprecedented nature of the shock, the apex bank has continued to favour a gradual liberalisation of the foreign exchange market, in order to smoothen exchange rate volatility and mitigate the impact which rapid changes in the exchange rate could have on key macro-economic variables.
This, he said, was in line with the international best practices in countries where managed float arrangements are in operation.
The apex bank had last adjusted the official exchange rate in August 2020 to N379/$1. The exchange rate displayed on its website has historically been referenced as the official exchange rate even as multiple exchange rate regimes have for years dominated the forex market.
However, all government transactions since 2021 have been converted, using the prevailing exchange rate at the official NAFEX window.
The CBN had last November devalued the naira by N6/$1 across all exchange rate lines in line with the exchange rate unification agenda of the apex bank as recommended by the International Monetary Fund (IMF) and World Bank.
In a weekly exchange rate for disbursement of proceeds of International Money Transfer Service Operators (IMTOs), all authorised dealers, Bureau-De-Change (BDC) operators and service providers were advised to add N6 across all rates.
The naira exchanges at N411.25/$1 on the Investors and Exporters (I&E) Window after the CBN extended its ‘Naira-for-Dollar’ policy to attract more foreign capital to the economy. At the parallel market, the local currency exchanged at N484/$1, weaker than the N483/$1 it exchanged for on Thursday.
Emefiele explained that in Nigeria, like other emerging market countries and countries reliant on oil exports, the decline in crude oil earnings, as well as the retreat by foreign portfolio investors, significantly affected the supply of foreign exchange into Nigeria.
