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- The Nigerian president made the choice to permit the naira to “float” as decided by the CBN.
- The Nigerian President abolished the CBN’s multiple exchange rate framework.
On June 14, the official exchange rate of the Nigerian naira against the U.S. dollar reached a historic low of NGN634 per dollar. This devaluation of the naira by over 30 percent occurred shortly after the Central Bank of Nigeria (CBN) denied that it had adjusted the exchange rate of the naira from NGN470 to NGN631 per dollar.
The decision to permit the naira to “float” by the CBN came after a commitment from Nigerian President Bola Ahmed Tinubu to eliminate the CBN’s multiple exchange rate framework, which had been in effect for several years.
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The Nigerian central bank maintained an exchange rate of under NGN500:USD1 for nearly a year prior to the noticeable depreciation of the naira. The value of one naira against the dollar varied between NGN600 and NGN800 during this period. The CBN reportedly rejected numerous requests to devalue the naira during this time.
However, following Tinubu’s assumption of office on May 29th, speculation began to emerge in Nigeria regarding the CBN’s intention to devalue the naira. Some observers interpreted Nigerian President Tinubu’s abrupt suspension of CBN governor Godwin Emefiele as an indication of his commitment to fulfill the promise made on his inauguration day. Meanwhile, on June 16th, the CBN communicated to Nigerians the significance of a variable currency rate via Twitter.
The Central Bank stated:
“The I and E [import and export] market operates on a willing buyer willing seller basis, where an entity in need of FX seeks out another entity willing to sell foreign exchange at an agreed price through an authorized dealer.”
