Why Nigeria’s Central Bank Devalued The Naira

February 20, 2015

The Central Bank of Nigeria, CBN, yesterday, in a bid to salvage the Naira from speculators scrapped the official window where it sells dollar to end users through banks twice a week.

The Naira will now be sold at the ruling inter-bank market rate indicating an implicit devaluation of the currency. The Naira yesterday at the inter-bank market sold for N197 to the dollar.

Financial Market Dealers Quote, FMDQ, a group comprising Nigeria’s main commercial banks and the central bank, said commercial banks have also been banned from re-selling CBN dollars to other banks, another attempt to end speculation in the naira.

The CBN had at the liberalization of the economy opened the Whole Sale Dutch Auction but later replaced it with the Retail Dutch Auction System where banks bid for foreign exchange on behalf of their customers.

The CBN in scrapping its window of direct sale of foreign exchange to end users said all foreign exchange needs are to be sourced from the inter-bank market whose rate is N197 to a dollar.

This implies that Nigerians who need foreign exchange will now approach their banks and buy at the ruling rate. There had been about three different markets for purchasing foreign currency in the country.

Source: AFK Insider

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