The Nigerian Naira closed at N664 against the United States Dollar on Wednesday at the official foreign exchange section, the Investors and Exporters forex window.
The around 38 percent decline in the Naira value was a result of President Bola Ahmed Tinubu’s decision to unify the nation’s foreign exchange rates and abandoned the long-standing N460 per dollar peg employed by the CBN to manage Naira against its global counterparts.
Initially, the currency was quoted between N750 and N755 per dollar, reflecting the market’s initial response to the newfound flexibility.
However, as trading progressed, the Naira demonstrated strength and resilience, ultimately closing at N664 per dollar, according to data from FMDQ.
This groundbreaking development signals Nigeria’s official transition from a fixed exchange rate regime to a floating exchange rate system.
The previous hard peg had unnerved investors and drained dollars from the economy, hindering growth and creating imbalances. By embracing market forces, Nigeria aims to foster a more transparent and dynamic foreign exchange market.
Under the new framework, buyers and sellers of foreign currency in the official foreign exchange (FX) market can now independently quote rates they find comfortable, ending the practice of rates being dictated solely by the CBN.
This shift empowers market participants to respond to prevailing economic conditions and fosters a more competitive FX market.
The unification of exchange rates is expected to have far-reaching implications for Nigeria’s economy. On the positive side, it can attract increased foreign direct investment, enhance liquidity in the FX market, and promote economic stability.
As Nigeria embraces this momentous change, economists, businesses, and citizens alike eagerly observe how the new floating exchange rate system will shape the country’s economic landscape.
The path ahead may be uncertain, but the bold move towards market-driven rates demonstrates Nigeria’s commitment to reform and adaptability in an ever-evolving global economy.