This means that the Investors and Exporters’ window (I&E) is now the default reference exchange rate for official transactions in the country.
Before now, government transactions were done at official rate of N379 to one dollar, which many stakeholders have described as unsustainable.
The NAFEX window managed by the FMDQ Exchange was established as a market trading segment for investors, exporters and end-users that allows for forex trades to be made at exchange rates determined based on prevailing market circumstances.
Nigeria operates multiple exchange windows, a situation that is discouraging investors as they are concerned about currency risk.
The CBN Governor, Godwin Emefiele, had last year announced plans to pursue unification of the exchange rate around its NAFEX rate.
He said, “We will continue to pursue unification around the NAFEX Market.” The CBN has always maintained that the black market is not a good determinant of the value of the naira. You’ll find that people who are in a hurry and do not want to procure the kind of documentation required, will sometimes rush to those markets.
“But we have used the period of this pandemic to prove that anybody dealing in that market is dealing in an illegal business.”
The World Bank and International Monetary fund (IMF) had on several occasions advised the government to unify its various exchange windows.
The IMF earlier this year advised the Nigerian government to immediately unify the current exchange rate in order to eliminate the parallel market premium.
The monetary fund called on the Nigerian government to be ready to increase interest rates if inflation rises.
According to the IMF, these reforms will help to remove and prevent further build-up of the forex backlog, and increase non-Central Bank of Nigeria’s participation in the I&E market window.
The fund said this policy reform was necessary to support the economy and ensure a well-functioning exchange rate system.
It said, “At the same time, it will be crucial to follow through with reforms without delays and not to backtrack, to ensure maximum effect. Likewise, clear and timely communications of the FX strategy to the private sector are also important to instill confidence.”
The Director General of World Trade Organisation (WTO), Dr Ngozi Okonjo-Iweala, also said Nigeria’s multiple exchange rate windows is a cause for concern to trade partners and the WTO.
During a meeting with President Muhammadu Buhari, she said, “So, yes, the WTO is concerned about foreign exchange; the way we manage it, the way we use it and how we use it to support manufacturing or imports and exports in our economy.”
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