IMF speaks On Nigeria’s Exchange Rate Unification Policy

Patrick OdeyJune 16, 2023

1 minute read

Nigeria has taken a major step towards achieving a more stable and transparent foreign exchange market by unifying all its exchange rates into one.

The new policy, which was announced by the Central Bank of Nigeria (CBN) on Wednesday, has received the endorsement of the International Monetary Fund (IMF) on Friday.

The IMF said it “greatly welcomes” the decision to introduce a unified market-reflective exchange rate regime, which aligns with its long-standing recommendations for Nigeria. The IMF also expressed its readiness to support the new administration in implementing the forex reforms.

The CBN’s new policy abolishes all forms of exchange rate segmentation and allows the exchange rate to be determined by market forces at the Investors and Exporters (I&E) window. This window, which was established in 2017, is where foreign investors and exporters can buy and sell foreign currency at a flexible rate.

The CBN said that all eligible transactions, including those related to medicals, school fees, travel allowances, and small and medium enterprises (SMEs), will be processed through the I&E window.

The CBN also said that it will reintroduce the “Willing Buyer, Willing Seller” model at the I&E window, which means that buyers and sellers can negotiate and agree on the exchange rate without any interference from the CBN.

The CBN’s Director of Financial Markets, Angela Sere-Ejembi, stated in a circular to authorized dealers that the new policy aims to enhance transparency, efficiency, and liquidity in the foreign exchange market. She also said that the policy will help to reduce the pressure on the country’s external reserves and support economic diversification and growth.

Nigeria has been struggling with multiple exchange rates for years, which have created distortions and uncertainties in the economy.

The unification of exchange rates is expected to boost investor confidence, improve access to foreign exchange, and reduce the risk of arbitrage and rent-seeking.