Business CBN Removes Peg on Official Naira-Dollar Exchange Rate

[LequteMan]

The Central Bank of Nigeria on Tuesday abandoned its naira peg to the dollar in favour of a flexible currency regime, Reuters reports.

The policy is a U-turn designed to boost local manufacturing and exports and stave off a recession.

However CBN Governor Godwin Emefiele sparked confusion by declining to say how the shift from a naira fixed at 197 to the dollar would be implemented.

"The MPC voted unanimously to adopt a flexible exchange rate policy to restore the automatic adjustment properties of the exchange rate," CBN governor, Godwin Emefiele said.

He added that the central bank would "retain a small window for funding critical transactions". Again, he sowed confusion by saying details would only be released "at the appropriate time".

He said the details would be published in a few days, after a Monetary Policy Committee (MPC) meeting in the capital, Abuja.

 

[Idagu Shalom]

I really don't understand what all this means. Banking literates should please expatiate.

 

[LequteMan]

I really don't understand what all this means. Banking literates should please expatiate.

It means the wide gap between the official rate and the parallel market rate will fall, so there'll be no more round-tripping. An analyst called it a 'technical' devaluation of the naira.

There's a little bit more here though, the 4th and last paragraphs explains it all - http://www.nigerianbulletin.com/thr...t-on-naira-dollar-exchange-rate-means.212693/