Pursuant to President Bola Tinubu’s directive for a unified foreign exchange rate between official and parallel markets, the Central Bank of Nigeria (CBN) on Wednesday floated the Naira, as it announced operational changes to the country’s foreign exchange market.
As a result of the decision, Naira weakened to about N755 to the dollar in the Investors & Exporters (I&E) window, from about N750 earlier in the day.
The decline in the Naira exchange rate is about 21 percent compared to about N463 to the dollar published as the latest update on the I&E window official rate on the CBN website since June 9.
The Director of Financial Market in CBN, Angela Sere-Ojembi, informed all authorised foreign exchange dealers and the general public about the immediate decision to collapse all segments of the market into an I&E window.
Under the new window, applications for medicals, schools fees, basic travel allowance (BTA)/personal travel allowance (PTA) as well as small and medium-scale enterprises (SMEs) would continue to be processed through deposit money banks (PMBs).
By implication, the apex bank authorised buyers and sellers of foreign currency in the official foreign exchange market to feel free to quote any rate they find convenient to customers in the FX market, as against previous practice where it dictated the rates.
Other changes include reintroduction of the ‘willing buyer, willing seller’ model at the I&E window, whose operations would be regulated by the extant circular No.FMD/DIR/CIR/GEN /08/007 dated April 21, 2017 that established it.
Under the new arrangement, all eligible transactions are permitted to access foreign exchange at the window.
The operational rate for all government related transactions shall be the weighted average rate of the preceding day’s executed transactions at the I&E window calculated to two decimal places.
Also, proscription of trading limits on oversold foreign exchange positions with permission to hedge short positions with OTC futures, while limits on overbought positions shall be zero.
The CBN announced the reintroduction of order-based two-day quotes, with bid-ask spread of N1, with all transactions to be cleared by a Central CounterParty, in addition to the reintroduction of order book to ensure transparency of orders and seamless execution of trades.
The CBN also announced the cessation of RT200 Rebate Scheme and the Naira Dollar Remittance Scheme introduced to encourage the export of home-made products and generation of foreign exchange for the country, with effect from June 30,2023.
The introduction of a uniform official exchange rate in the country removes every incentive for people and businesses to patronise the black market.
