CBN Devalues Naira, Adopts I&E as Official Exchange Rate

May 26, 2021
devalue naira
Image Credit: Jean Chung/Bloomberg

By Dipo Olowookere

The Central Bank of Nigeria (CBN) has again devalued the Naira as the country moves towards the long-awaited single exchange rate regime from the current multiple exchange rate system.

The Governor of the CBN, Mr Godwin Emefiele, confirmed this development when he addressed journalists in Abuja on Tuesday.

However, he stressed that Nigeria is still operating a managed-float exchange rate regime, noting that the monetary authorities would monitor the market before deciding to eventually make it a free-float system.

“We are still running a managed-float [system]. We are monitoring the market and seeing what is happening for us to ensure that the right things are happening for the good of the Nigerian economy,” the nation’s chief banker told reporters yesterday at the close of the two-day Monetary Policy Committee (MPC) meeting.

The MPC, according to the central bank chief, voted unanimously to retain the monetary policy rate (MPR) at 11.5 per cent, the Cash Reserve Ratio (CRR) at 27.5 per cent, the Liquidity Ratio (LR) at 30 per cent and the Asymmetric Window at +100 and -700 basis points around the MPR.

Business Post reports that before now, the official exchange rate was N379/$1 but according to the CBN, the new official rate of the Naira to the Dollar is the Investors and Exporters (I&E) rate of N410.25/$1.

This change has already been effected on the website of the CBN, confirming the stoppage of the interbank rate of N379/$1.

This development rubbishes a recent claim by the Association of Bureau De Change Operators of Nigeria (ABCON) that the apex bank has not adopted the I&E rate as the official exchange rate in the country.

“The ABCON and CBN have observed with disdain the speculative behaviour currently beclouding the market with the misinformation that the CBN has adopted I&E window as its official rate.

“The above information is not true because as operators, we still fund our accounts at our normal rates of N393/$ and not the I&E window rates for our operation this (last) Friday,” the president of the association, Mr Aminu Gwadabe, had said.

Two months ago, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, had disclosed that the government was planning to adopt the investors’ FX rate as the official rate.

“Within the government and the central bank, there is only one official rate and that’s the NAFEX rate (also known as the I&E rate),” the Minister had said.

But hours later, the CBN countered Mrs Ahmed, insisting that the official rate remained at N379/$1, noting that it was not planning to devalue the local currency as it was being speculated then.

“The country is deemed not to be practising a multiple currency regime as long as rates vary or range around a band that is not more than 2 per cent below the nominal market rate.

“In our case, the nominal market rate is NAFEX. If the Minister says that the rate for monetisation is anchored or benchmarked on NAFEX, the Minister has not talked about a flexible exchange rate,” Mr Emefiele had said.

Dipo Olowookere

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

Mr Olowookere can be reached via [email protected]

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