Naira To Trade ‘Freely’ Against Dollar

*Banks Trading Forex At N750/$ In Nigeria

The Central Bank of Nigeria (CBN) has given commercial banks and dealers in the forex market the green light to sell forex freely which is at a market-determined rate.

This is in line with the promise of President Bola Tinubu to unify the multiple exchange rate in the market.

The development means banks can now sell forex at market-determined rates, suggesting Nigeria is now operating a freely floating exchange rate.

However, official confirmation will have to come later in the day when data from the FMDQ is available.

The Investors & Exporters (I&E) window is now quoting a range of between N750 -N755/$, according to customers who cited emails received from their banks. The Central Bank of Nigeria (CBN) is however still quoting N463/$ as the I&E rate on its website but the last time it updated the rate was June 9.

The latest move by the CBN follows President Bola Tinubu’s suspension of CBN governor Godwin Emefiele whose unorthodox monetary policies had become a stumbling block to investors and the economy.

The exchange rate could go as high as between N800 and N1000 by the end of today, according to some bankers, who say the CBN’s next move should be to prioritise supply of dollars to support the naira float.

“The convergence of the rates is only the first step, the next step is the most crucial and that is to boost supply into the market,” a source told BusinessDay.

“No foreign investor will come without a hedge and that can only come when there is assurance of supply. That’s the hard work,” the source said.

Another knowledgeable source is of the view that the willing buyer/willing seller arrangement that has now been adopted is only the first of six steps to fixing Nigeria’s broken FX market.

The second step must be to provide a hedge mechanism that is priced in line with the market while the third step is to ensure market yields are attractive to Foreign Portfolio Investors (FPI).

The next steps are to ensure transparency and remove all controls around domiciliary accounts. Finally, there is also a need to clear the dollar backlog in the market in order to attract FPIs.

“The focus is on supply,” the source Told BusinessDay.

Expectations are high after the initial move to fix Nigeria’s broken FX market.

Meanwhile, an investment banker and the Co-founder, Comercio Partners, Nnamdi Nwizu, said the immediate impact of the directive is enhanced foreign exchange inflow into the economy and further rise in the inflation rate, as the I&E window exchange rate rises aggressively as already seen today.