The Central Bank of Nigeria (CBN) has allowed deposit money banks banks to freely trade foreign exchange at any rate.
The development is in line with the new policy direction of President Bola Tinubu of eliminating multiple exchange rates.
President Tinubu’, according to sources is determined to unifyI the exchange rates so as to bring confidence into the economy and reduces the high level of volatility in the FX market.
Consequently, CBN has directed banks to remove the cap on the investors and exporters’ (I & E) window of the foreign exchange market in a bid to float the local currency,.
The report stated that banks are now allowed to trade forex on the I & E window at any rate, subject to N1 spread.
As a result of the directive, the naira depreciated to between N700 tans N750 to a dollar on the I&E window on Wednesday.
This development suggests that banks are now authorised to sell forex at rates determined by market forces, indicating a shift towards a free floating exchange rate system in the country.
Multiple sources within the central bank, as well as informed traders, have confirmed this development.
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They further reveal that trades are currently being conducted at rates as high as N750/$1.
But the parallel market has reacted negatively to the development with the exchange rate surging to as high as N773/$1 for incoming foreign currency transactions.
However, some analysts see the development as normal, stressing that initially, Naira would depreciate at the official windov, while it will appreciate at the parallel market, with eventual realignment of the rates.