In a significant development following the suspension of Godwin Emefiele as Central Bank governor, recent reports indicate that the apex bank has granted commercial banks and forex market dealers the authority to freely sell foreign exchange at rates determined by the market.
According to sources, currency trades have already reached an astonishing high of ₦750 to $1, signaling a considerable fluctuation in exchange rates.
Numerous sources, predominantly traders, have corroborated these reports.
It is worth recalling that President Bola Tinubu had previously pledged to consolidate the various exchange rates prevalent in the market.
Subsequent findings have revealed that banks are now permitted to sell foreign exchange at rates determined by market forces, suggesting a shift towards a freely floating exchange rate system in Nigeria.
Market observers eagerly anticipate the conclusion of trading at the FMDQ, where data will be available to substantiate this transition.
Furthermore, there may be an official confirmation issued by the central bank before the end of the business day.
What this really means
In a recent interview with Arise Television on Wednesday, June 14, 2023, Andrew Nevin, the Advisory Partner & Chief Economist of PricewaterhouseCoopers (PwC), expressed his reaction to the ongoing development of unifying foreign exchange rates in Nigeria. According to Nevin, this significant move will have a profound impact on the country, creating a positive ripple effect by amplifying investment opportunities.
“What has been happening is that CBN is taking dollars from the Federation’s account and giving to privileged individuals at ₦411 to US dollar while the real price is ₦700 to ₦750 to the Dollar, we don’t really know because they’ve removed price transparency.
”What happens is that the state government cannot pay their pensioners. That fundamental issue will be addressed by the development. Now the state government will get full value for its dollar.
“It will have a dramatic impact on the fiscal structure of the country when we stop giving the dollar to privileged individuals. We get better investment, more fair use of the country’s resources and improved business environment, this will strengthen Nigeria’s currency”, he stated.
For years, Nigeria has maintained a tightly controlled official exchange rate as the country’s forex reserves hit new lows. While the CBN maintained an artificial rate of $1/₦462.