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“The Nafex rate for the I & E is the accepted window for naira exchange rate” – Godwin Emefiele
Nigeria’s economy slid into a second recession in 2020 in the third quarter following another contraction in output.
At a virtual briefing in Abuja on Tuesday, the governor of the central bank of Nigeria, Godwin Emefiele addressed questions related to the inflation and recession as well as the foreign exchange rate in Nigeria.
Naira Exchange rate
Emefiele criticised analysts for pinning naira exchange rate on the parallel market which is N480/$1. He said, “the analysts are supposed to know, yet they play with numbers and determine the naira exchange rate using the parallel market.”
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Emefiele clears that air saying that the Nafex rate, for the investors and exporters (I & E) is the accepted window for the naira exchange rate.
The I & E window today ranges between N380/$1 to N387/$1 and the price determination is open at the market. However, the CBN has no hand in that determination he noted.
The parallel market is a shallow market in Nigeria with 5% of the market share Emefiele warns. People who use the parallel market in Nigeria are those who desire to deal in illegal forex.
Having depreciated the naira by 28% in 2020, Emefiele said that Nigeria is not alone in the economic crises. Inflation in several markets and especially developing economies remain relatively high owing to the persistence of exchange rate pressures and several structural issues.
The naira has taken some hit and weakened to a 3-month low due to unofficial movement of foreign exchange in the parallel market.
CBN policies, as well as forex liquidity, are also to blame for the unofficial movement of foreign exchange. Emefiele further warns that patronizing the parallel market is breaking the naira.
NAFEX Meaning
Nigerian Autonomous Foreign Exchange Rate Fixing, NAFEX is the FMDQ benchmark rate for forex spot operations in the Investors & Exporters, I & E, window.
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