The Central Bank of Nigeria (CBN) has released some of its hold on the naira.
In the exchange rate section of its website, the bank replaced the N305/$ rate to ‘the naira exchange rate is market-determined’.
This would mean that the exchange rate will be determined by market demand and supply.
However, inside sources say the act was carried out at the end of May and described it as a managed float as the bank intends to still carry out interventions as it deems appropriate.
This is similar to its actions in June 2016 when the exchange rate was adjusted to N305 from the official N199/$ rate.
At present, the bank makes forex available to various segments of the market to meet demand.
It also introduced an Investors and Exporters Window to provide forex for industrial purposes.
The Nigeria Customs Service had adjusted the exchange rate for its levies to N326 from N306 and began implementation on Monday.
Emmanuel Onyeme, public relations officer of the Association of Nigeria Licensed Customs Agents (ANLCA) at Tin Can Island Port, had confirmed the development saying the rates were effective since Monday, June 10.
President Muhammadu Buhari had initially kicked against devaluing the currency saying the action was synonymous to killing the naira.
“I’m not an economist neither a businessman, I fail to appreciate the economic explanation. How much benefits have we derived from naira devaluation in the past?” he had said.
What are the implications?
The primary effect might be an initial tumble, as was experienced in 2016.
People in need of forex for school fees, medical payments and basic travel allowance would have to pay more. The rates would, however, reach a place of stability after a period with monitoring from the apex bank.
It would also mean that the federal and state governments would have to pay more to service dollar-denominated debts.
This would, however, mean more revenue for the Nigerian National Petroleum Corporation (NNPC) and other enterprises that receive earnings in dollars.
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