On Friday, following news that the Central Bank of Nigeria (CBN) had adopted a flexible exchange rate as reference for government transactions, the official and the official market reacted, as Naira weakened further.
Ripples Nigeria had reported that the CBN deleted from its website the band of N379 to a dollar used as basis for budget preparation and other official transactions since last year.
The move confirms CBN will now adopt the exchange rate for investors and exporters known as Nafex, a rate that is different from Bureau de change and also the parallel market rate which CBN considers illegal.
CBN had last month denied such plan to adopt, claiming Journalists misinterpreted the Minister of Finance, Zainab Ahmed that the Nigerian government had adopted the flexible exchange rate.
After Friday’s trading, as expected, data posted by FMDQ showed naira at the investors and exporters window hit a record low of 426.67 against the dollar before closing at N411.67.
The closing rate represents 0.10 percent or N0.42 devaluation from N411.25 to a dollar it exchanged on Tuesday.
This occurred as the foreign exchange supply increased significantly to $203.42 million from $98.33 million recorded on Tuesday.
The black market also reacted to the CBN officially weakening the Naira.
According to data posted by abokifx, the parallel market exchange rate moved by 0.20 percent or N1 to close at N484 from N483.00 it has traded since last week.
By implication, the difference between the parallel market and the official market exchange rates increased to N72.33 on Friday from ‘N71.75 on Tuesday.
What this indicates is that if the central bank indeed plans to unify Nigeria exchange rate similar to other African countries, it may have to weaken the official rate further in the nearest future.