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CBN floats the Naira as banks offer $1 for N700

Days after President Tinubu spoke about the need to unify Nigeria’s exchange rate, Nigeria’s Central Bank appears to have instituted a managed float .

In a move away from a fixed foreign exchange policy, Nigeria’s Central Bank has loosened control of rates in what appears to be a managed float. TechCabal confirmed from one of Nigeria’s leading banks that the USD is now exchanging for N699 (buy rate) and N700 (sell rate). For years, Nigeria 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/N462, most people couldn’t get the greenback at those rates.

To control demand, the CBN created a list of 43 items for which importers could not access FX at official rates. At some point, it also limited FX access for students traveling abroad access. Yet these workarounds didn’t solve the demand problem, forcing individuals and companies to head to the parallel market where prices rose to as much as $1/N755 this year. It created a massive arbitrage opportunity, with the World Bank advising the Central Bank to merge its exchange rate windows on several occasions.

The Buhari administration boasted of improving the exchange rate prices before it was elected, and was reluctant to float the Naira. Instead, it blamed other players for the massive gap between official and black market rates. At its most ridiculous, CBN Governor Godwin Emefiele blamed the rate aggregation site, Aboki Fx and other black-market operators for causing volatility in the FX markets.

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