The much awaited new forex regime commenced on Monday as the Central Bank of Nigeria (CBN) sold a total of $616.5 million at N280.00 per dollar after removing the official rate in an effort to alleviate scarcity of foreign currency and improve the country’s economy.
The flexible exchange rate policy by the CBN also allowed the forces of demand and supply to determine the rate at which Naira commenced and closed trading in the interbank market today.
The Naira slumped 30 per cent against the dollar after the CBN removed its currency peg. The rate was notably weaker than the N197 peg the central bank had maintained for 16 months before abandoning it last week.
Foreign investors and economists had called for naira devaluation for months as the forex shortages hit economic growth and led to widespread capital flight.
Nigeria’s economy, under the All Progressive Congress (APC) government, contracted by 0.4 per cent in the first quarter.
With a likely sharp fall of the naira, Nigerian products will become relatively cheap and imports more expensive. Analysts believe that the new system certainly does not mark the end of Nigeria’s economic problems.
President Muhammadu Buhari had resisted devaluing the naira for more than a year, even as other major oil producers, including Russia, Kazakhstan and Angola, allowed their currencies to fall after crude prices collapsed.
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