The Central Bank of Nigeria (CBN) has directed banks to begin trading foreign exchange at any exchange rate in the Investors & Exporters window based on willing buyer, willing seller arrangements.
In response, the I&E window exchange rate rose sharply to ₦610 per dollar, as at ₦12:50 pm from ₦471.67 on Wednesday night.
The authorisation means that banks now have the power to sell forex at a market-determined rate.
Meanwhile, an investment banker and the Co-founder, Comercio Partners, Nnamdi Nwizu, said the immediate impact of the directive is enhanced foreign exchange inflow into the economy and further rise in the inflation rate, as the I&E window exchange rate rises aggressively as already seen today.
This implies that Nigeria has eased its control of the naira, allowing the local currency to freely float.
A free-floating exchange rate occurs when a government allows the exchange rate to be determined purely by market forces and there is no attempt to ask the central bank to influence the external value of the exchange rate.
Checks by Africa Today News, New York showed that the naira appreciated by 0.18 percent to close at N471.67/$ at the I&E window on Tuesday, according to details on FMDQ OTC Securities Exchange, a platform where FX is officially traded.
At the end of the trading day on Wednesday, the naira closed at N664.04 per dollar, data from the FMDQ indicated.
The development comes days after the suspension of Godwin Emefiele as CBN governor by President Bola Tinubu.
Folashodun Adebisi Shonubi, deputy governor, the operations directorate, is expected to act as the CBN governor pending the conclusion of an investigation ordered by the president into Emefiele’s activities.
The Department of State Services (DSS) later announced that Emefiele is currently in its custody for ‘some investigative reasons’.