The naira has been allowed to free float against the dollar at the investors and exporters (I&E) window, following a directive by the Central Bank of Nigeria (CBN) to commercial banks.
The CBN reportedly instructed the banks to sell forex at market-determined rates, based on a “willing buyer, willing seller” arrangement.
This means that Nigeria has relaxed its grip on the naira, letting the market forces of supply and demand determine its value. A free-floating exchange rate is one that is not influenced by any government or monetary authority intervention.
The move comes days after President Bola Tinubu suspended Godwin Emefiele as CBN governor over allegations of mismanagement and corruption.
Emefiele is currently under investigation by the Department of State Services (DSS) and has been replaced by Folashodun Adebisi Shonubi, deputy governor, operations directorate, in an acting capacity.
The naira was trading at N750-N755 per dollar at the I&E window on Wednesday, according to sources familiar with the matter. The official exchange rate at the CBN website was N410.25 per dollar as of June 14, 2023.
The free float of the naira is expected to have implications for the economy, especially for inflation, interest rates, foreign reserves and external trade.
Some analysts have welcomed the move as a positive step towards achieving exchange rate convergence and transparency. Others have cautioned that the move could expose the naira to volatility and speculation.
