Nigeria’s Central Bank Initiates Bold Currency Reforms, Naira Hits Record Low

Nigeria’s central bank allowed the naira to drop about 2% on the official market to a record low on Wednesday, but the currency’s rate remained above where it trades at central bank auctions and on the black market.

Nigeria is trying to find a way to unify its multiple exchange rate system, used to keep the naira artificially strong.

New President Bola Tinubu told members of his governing party last week that the country would not have multiple exchange rates anymore.

The naira fell as low as 475 naira to the U.S. dollar from Tuesday’s trades of around 465 naira, before recovering to 466 naira.

Traders said the central bank had allowed them to trade the currency as weak as 475 naira to the dollar on the official market, outside a previous band of 460 to 467 naira to the dollar.

In the past, the bank has allowed the naira to weaken in 5 naira increments.

The central bank has been adjusting the naira gradually on the official market to avoid a large-scale devaluation.

The bank sold the dollar at 645 naira at its Friday auction, fuelling speculation that a devaluation which could weaken the official exchange rate closer to the auction level was imminent.

Last Thursday, the central bank denied devaluing the naira, following media reports of a big fall in the currency after Tinubu met the central bank governor.