Just two weeks after the inauguration of Nigeria’s new president Bola Tinubu, the country has officially floated the Naira after years of maintaining a fixed exchange rate, Business Day reported on June 14.

The move by the government of Africa’s biggest economy is geared towards increasing foreign exchange liquidity and curtailing a thriving black market for foreign currencies. The dollar fixed-rate set by the Central Bank of Nigeria (CBN) had discouraged investors and caused a shortage of dollars in circulation in the country.

Business Day reported that banks are quoting a market-based rates on willing buyers and sellers, with a range of N750 to N755 per US dollar in the Investors & Exporters (I&E) window. But the CBN has been slow in updating its rates on its website, still listing the I&E rate as N463/$1. The site hasn’t been updated since June 9. On June 1, CBN was forced to deny media reports that it had devalued the naira from N461/$1 to N631/$1.

With the new policy, bankers predict that the exchange rate could reach as high as N800 to N1000 by the end of the day, the report said. Although it is a wait-and-see situation, analysts expect the currency float to help close the gap between official and parallel market exchange rates, attracting foreign investor participation.

The floating of the Naira also opens the opportunity for forex traders to trade by market-determined rates, according to a report published June 14 by Nairametrics.

-Edited by Vincent Matinde, Faustine Ngila
-Top Photo: Lagos, Nigeria/Unsplash