The Central Bank of Nigeria (CBN) has removed the previous cap on exchange rates according to international money transfer operators (IMTOs). This is done in its efforts to further expand a transparent foreign exchange (forex) regime.
In a memo with reference number, TED/FEM/FPC/GEN/001/002, Director, Trade and Exchange department, Dr Hassan Mahmud, said the policy is aimed at liberalising the forex market and ensuring transparency in forex transactions. It will also boost diaspora remittances and other foreign capital inflows to Nigeria.
The new circular follows a similar one that seeks to address excessive foreign currency change speculations within the economy.
Following the action, the naira seems to be gaining strength from the recent policy shift of the CBN as the Nigerian currency exchanged for N1,450 at the unofficial market yesterday. The British Pound was exchanged for N1,931.066 while N1,644.121 was exchanged for one Euro and N1,095.542 was exchanged for one Canadian Dollar.
In the latest circular, CBN stated: “IMTOs are hereby allowed to quote exchange rates for naira payout to beneficiaries based on the prevailing market rates at the Nigerian forex market on a willing seller, willing buyer basis.”
Indeed, the new directive follows the principle of a ‘willing seller, willing buyer’ basis, meaning that exchange rates will be determined by market forces. This will also tighten the noose on the banks that hitherto profit from the former practice.
Analysts said the end game is to achieve convergence with the parallel market and more inflow into the official channel, which now allows CBN to intervene as needed.
