The Central Bank of Nigeria, CBN, has said that the FG is not adopting a foreign exchange rate or NAFEX for its transactions as earlier reported by Bloomberg.
According to CBN Governor, Godwin Emefiele, this is misinformation. The CBN operates a “managed float exchange rate” regime that allows it to intervene regularly in the foreign exchange market Emefiele said.
With that, the bank is able to control the direction of the naira float and shore up the difference between all inflows and outflows in extremely volatile periods.
Rather than a devaluation of the naira as Bloomberg reported, the CBN is maintaining its Foreign Exchange Policy of managed float.
The foreign exchange market in Nigeria has faced several challenges the last year – naira devaluations and dollar scarcity.
During the MPC meeting, Emefiele addressed dollar scarcity. He said that the CBN dispenses about $80 million weekly to the deposit banks for foreign utilities within its policy to address dollar scarcity.
- FG adopts the NAFEX rate for its official FOREX transactions
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The CBN exchange rate regime
Naira exchange rate fluctuates according to supply and demand. The CBN manages this issue through monetary policies or sometimes intervention in the currency market which implies a managed regime.
This action helps the bank to relieve fluctuations in the exchange rate and to maintain a free flow in foreign trade and international payments.
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A flexible exchange-rate policy would have brought the FG closer to unifying exchange rates. The CBN has yet to eliminate the multiple exchange rate to meet the demands of both the World Bank and the IMF.
Further devaluation of the naira would fortify the FG’s discussions with the World Bank for a $1.5 billion loan.