Nigeria adopts flexible foreign exchange policy

After several months of dollar scarcity in Nigeria, Africa’s biggest economy, the central bank said it will launch a foreign exchange interbank trading window on Monday to boost the supply of foreign currency, spur economic growth and restore investor confidence.

Nigeria has suffered from foreign exchange shortages since global oil prices fell in 2014. Public finances have been affected, as have currency reserves. The country depends on oil for more than 70 percent of government revenues and more than 80 percent of foreign exchange.

The apex bank has pegged the naira at 197-199 per dollar since March 2015 and restricted trading in foreign currencies. Importers struggle to access foreign exchange at the official rate, with the naira falling to about 350 per dollar on the black market. According to abokifx.com, a dollar sold at N370 in Lagos on Wednesday afternoon. The new policy is expected to close the huge gap between the official and parallel market rates.

Central Bank Governor Godwin Emefiele told reporters on Wednesday that the window’s exchange rate will be purely market-driven. This confirms the resolution following the last Monetary Policy Committee (MPC) metting of the bank where it was agreed that a more flexible exchange policy be introduced. However, no guidance how this will be done was given.

Emefiele said precise guidelines will be published later on Wednesday. He explained that the new window would have eight to ten primary traders handling minimum volumes of $10 million.