Nigeria Central Bank Quashes Talk of Exchange-Rate Policy Change

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Wednesday, June 12, 2019   / 01:40 PM / By Paul Wallace of Bloomberg / Header Image Credit:  CBN


  • Central bank says naira rate determined by investor FX window
  • IMF reviewing how it deals with multiple exchange rate regimes


Nigeria’s central bank said it made no change to its naira policies, after a revision on its website led some analysts to speculate that it was ending a system of multiple exchange rates. 

“Nothing has changed in Nigeria’s exchange-rate structure,” and the naira’s value continues to be determined by trading in the Investors’ & Exporters’ FX Window, Isaac Okorafor, a spokesman for the Abuja-based institution, said in a text message. 

The I&E FX window, also know as the Nafex window, was introduced in 2017 as Nigeria sought to attract capital inflows by offering investors a weaker and market-determined naira rate. The central bank pegs an official rate -- meant for government bodies and fuel importers -- at a level about 20% stronger than the market price. 

The central bank’s homepage on Tuesday stated that the official rate was “market-determined,” whereas it previously gave a value. The website reverted to its original form on Wednesday. 

The naira was little changed at 360.46 per dollar on the I&E market as of 1:20 p.m. in London, and was 306.5 on the official market. Bonds rose slightly, with yields on one-year interbank T-bills falling five basis points to 13.93%. 

Central bank Governor Godwin Emefiele, who was re-appointed for a second five-year term last month, says the current system, which includes restrictions on imports, is the best way to diversify Nigeria’s oil-dependent economy and boost manufacturing. 

The International Monetary Fund has long been critical, saying the absence of a single exchange rate creates confusion and deters foreign investment. On Monday, the Washington-based lender said it was, for the first time in almost 40 years, reviewing how it deals with members that have multiple exchange rates. 

“By limiting the circumstances in which Fund members may introduce and maintain multiple exchange rates, the multiple-currency practices policy aims to promote orderly exchange arrangements and a stable system of exchange rates,” it said in a statement. 

Renaissance Capital said in an April note that Nigeria and Venezuela are about the only emerging markets in its coverage that have multiple exchange rates.

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