Nigeria floats naira, I&E rate reaches N755/1$

Nigeria has floated its naira currency after years of a fixed exchange rate, allowing buyers and sellers to quote rates in the foreign exchange (FX) market.

The Investors & Exporters (I&E) window is currently quoting rates between N750 and N755/$, marking a 21 percent decline compared to the previous rate.

The decision follows the suspension of CBN governor Godwin Emefiele due to his unconventional monetary policies. The exchange rate may temporarily rise to N800 before stabilizing.

This move is expected to reduce activity in the parallel market and attract more FX supply to ease rates. However, further steps are needed to fix Nigeria’s FX market, such as providing a hedge mechanism, attractive market yields for foreign investors, transparency, removing controls on domiciliary accounts, and clearing the dollar backlog.

The focus now is on increasing the supply of dollars. Foreign investor participation will depend on the lifting of capital restrictions and the free flow of capital. The harmonization of exchange rates should narrow the gap between official and parallel market rates.