Nigeria allows currency to drop third of value on official market
Nigeria allows currency to drop third of value on official marketJuly 03, 2023 13:52
For decades, multiple exchange rates had led to foreign currency shortages that worsened under suspended central bank governor Godwin Emefiele.
Nigeria’s central bank allowed the naira currency to drop as much as 36 percent on the official market on Wednesday, days after President Bola Tinubu suspended the central bank governor who oversaw much-criticised multiple exchange rates.
For decades, multiple exchange rates had led to foreign currency shortages. Under suspended apex bank chief Godwin Emefiele, the situation worsened, making it difficult for investors to take out money from Africa’s biggest economy.
Traders told the Reuters news agency the central bank had removed trading restrictions on the official market, which drove the naira to a record low of 750 to the dollar on the official market, down from Tuesday’s low of 477 naira to the dollar.
The new rate is equivalent to the black market rate which has stood at approximately 750 to the dollar since last year.
This was the first time since 2016 that the naira had recorded a big fall on the official market before the central bank introduced a managed exchange rate in 2017.
Charlie Robertson, head of macro strategy at FIM Partners, said, “A much-needed devaluation which takes the currency from 50 percent overvalued to about 5-10 percent [cheaper]. This should improve the current account and improve the long-term investment climate.”