The Central Bank of Nigeria (CBN) yesterday moved closer unifying the exchange rates in the official market and the Investors and Exporters (I&E) window, as it devalued the naira to N380.5 per dollar in the official market.
Data from FMDQ showed an adjustment of the official exchange rate to N380.5 per dollar from N360.5 per dollar, the previous day, indicating 5.5 per cent of N20 devaluation of the naira in the official market. The new official rate closely aligned with the I&E indicative exchange rate which remained stable at N386.5 per dollar at the close of business yesterday.
This move reduces the premium between the official rate and the I&E rate to N6.5 from N26.5 per dollar. The multiple exchange rate regimes led to the emergence of different exchange rates in the three major segments of the foreign exchange market, namely the official market, the Investors and Exporters (I&E) window also known as NAFEX, and the parallel market.
The plan to unify the exchange rates was first muted by the Minister of Finance three weeks ago in a document which stated that the government over the next 12 months would seek to unify the exchange rates to generate more naira from its foreign inflows and manage the rate in a sustainable manner.
Similarly, the CBN Governor, Mr Godwin Emefiele while speaking two weeks ago at an investor’s conference with the federal government organised by Citi Bank said that the apex bank will pursue the unification of the exchange rates. “We will continue to pursue unification around the NEFEX Market,” Emefiele said.
Prior to the comments by Emefiele, eminent economist and Chief Executive of Financial Derivatives Company Limited, Mr Bismarck Rewane, in an exclusive interview with Vanguard, projected that the official exchange rate will be unified with that of the I&E window.
Stressing that the scrapping of multiple exchange rates and adopting an efficient exchange rate adjustment mechanism is inevitable, he said: “What the CBN is trying to do, I believe is a managed floating exchange rate, not a free-floating exchange rate. And in trying to do that they have converged all the way from N306 to N360. I think ultimately what the I&E window rate will be, when that market becomes more efficient and well supplied, you will find that that will be the rate.”
