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Naira Float: It is a “Controlled float” not completely free float – CBN
The deputy governor also cautioned against assessing whether the naira to dollar exchange rate had fallen to its lowest level, speculating…
The current monetary policy decision made is a controlled float, not a free float, according to the Central Bank of Nigeria.
Deputy Governor Kingsley Obiora disclosed that the Central Bank of Nigeria confirmed its most recent monetary policy decision in a recent interview with Bloomberg in Rabat, Morocco.
The deputy governor also cautioned against assessing whether the naira to dollar exchange rate had fallen to its lowest level, speculating that it might still be too early to do so.
More Policies
Obiora stated that Nigeria plans to announce further measures to loosen foreign exchange controls, in the interview, stating that Nigerians should expect more policy changes “in the next couple of weeks.”
He added that the CBN has not intervened in Nigeria’s FX markets since the new policies were introduced, adding:
- “We are allowing the market itself to set a price.”
Float
The CBN chief noted that it has no plans to set the Naira on a totally free float, as no country runs a completely free float, the report said:
- “There is no country in the world, even the US, that has a completely free float,” he said.
- “It may be too early to determine if the naira’s exchange rate to the dollar has bottomed out.”
Obiara cited reports by the IMF that suggest that the naira should not be as weak as the parallel market indicated, adding that he expects that the supply of foreign exchange will eventually be unlocked once the price of the dollar reaches a level that both buyers and sellers consider “fair.”
GDP growth
He also noted that he expects Nigeria’s GDP growth to hit 6% by 2024, noting that GDP should approach $700 billion in 4 years, according to Obiora, the report noted:
- “The removal of subsidies, along with the convergence of the exchange rates will drive economic growth, especially from next year when the policies start making an impact.
- “I completely expect us to do 5% to 6% growth next year,”
- “Over the next four years, you may see the GDP approach something like $600 billion to $700 billion,”
What you should know
The Nigerian exchange rate fell to N770.38/$1 on Monday, as the foreign exchange market experienced significant volatility following the CBN’s operational changes.
The opening rate at the I&E window stood at N703.50/$1, while the closing rate reached N770.38/$1. These figures indicate a notable increase in exchange rates throughout the trading day. The spot rate experienced a high of N799.00 and a low of N461.00, highlighting the market’s volatility.
The CBN’s decision to allow market-determined forex rates is seen as a major step towards currency reforms in Nigeria. This is in line with President Bola Tinubu’s promise to unify the multiple exchange rates in the market.
According to analysts, a unified and flexible exchange rate regime will help boost investor confidence, increase foreign inflows, reduce import costs, and ease pressure on the naira.
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