Analysts say new policy long due since practice of pegging naira to US dollar simply unsustainable.
Rafiu Ajakaye - LAGOS, Nigeria (AA) – The value of Nigerian currency naira to other foreign currencies would “be purely market driven” from now on, Nigeria’s central bank governor announced Wednesday.
In remarks made at a news briefing in the capital Abuja, Governor Godwin Emefiele said: “The time is right to restore the automatic adjustment mechanism of the exchange rate with the re-introduction of a flexible interbank exchange rate market.
“The market shall operate as a single market structure through the inter-bank/autonomous window; the exchange rate would be purely market-driven.”
Analysts said the new policy was long due because the practice of pegging the value of naira to the U.S. dollar was not sustainable; moreover, the Nigerian government had to spend billions of scarce dollars to defend the naira in the face of crumbling oil prices.
Until the announcement of the policy, the naira officially exchanged at 197 to the dollar. The interbank rate was around 285 naira to the dollar, while the naira exchanged at around 350 to the dollar in the parallel (black) market.
Analysts said the new policy meant the central bank would no longer sell foreign exchange to anyone except at values obtainable at the interbank market. They added that the move would end speculation that had harmed the naira in the last few months.
Atiku Samuel, an economist with the BudgIT, a civic accountability platform, said: “What the central bank has done is to simply eradicate one of the three different exchange rate markets. Now, everyone will get the dollar at the value determined by market forces at the interbank market or the parallel market.”
The central bank, meanwhile, insisted that its earlier policy to not sell dollars to importers of some 41 items remained in place; Emefiele said the decision was to stimulate local production of the items, which include rice, cement and steel.
The new foreign exchange policy will take effect from June 20.