The Central Bank of Nigeria had recently instructed Deposit Money Banks to eliminate the rate cap on the naira at the I&E window.
By Johnson Atoukudu:
On Tuesday, the Nigerian naira experienced a 1.79 percent appreciation against the United States dollar on the Investor & Exporter forex window, closing at N756.61/$. The local currency had previously weakened to 770.38/$ at the close of trading on Monday, compared to 686.96/$ at the close of trading on Friday.
Data from the FMDQ revealed that trading on Tuesday began at 701.75/$ and reached a peak of 781/$ before settling at 756.61/$.
Furthermore, Tuesday’s trading showed an improved turnover of $134.47 million, a significant increase from the $78.03 million recorded at the close of trading on Monday.
At the parallel market, the naira was bought and sold at rates of 750/$ and 760/$ respectively, as reported by some Bureau de Change Operators interviewed by Waffi TV. A BDC operator named Mr. Abdul from Lagos mentioned that exchange rates have been quite volatile lately, with the dollar trading within the range of 750/$ to 760/$. Euro and Pound Sterling were also traded at specific rates.
The Central Bank of Nigeria had recently instructed Deposit Money Banks to eliminate the rate cap on the naira at the I&E window, allowing for a free float of the national currency against the dollar and other global currencies. Prior to this announcement, the naira closed at 471.67/$ on the I&E window, while the parallel market recorded a rate of 740/$.
Prof. Segun Ajibola, an Economics professor at Babcock University and former President of the Chartered Institute of Bankers of Nigeria, described the previous multiple exchange rate system as a breeding ground for corruption. He emphasized the need to expand foreign exchange sources such as non-oil exports, remittances, and foreign direct investments, as well as capitalize on OPEC quotas for crude oil exports. By doing so, the pressure on both the official and unofficial markets could decrease while foreign exchange supply increases, eventually leading to a unified and desired exchange rate equilibrium.