Naira Dips: Nigeria’s Central Bank Embraces Mild Weakening, Setting New Records

Mouad Boudina
Mouad Boudina
2 Min Read
Naira

The Central Bank of Nigeria recently authorized a moderate devaluation of the naira by approximately 2% on the official market, resulting in a historic low. However, it is important to note that the currency’s exchange rate remains higher compared to its valuation during central bank auctions and the parallel market.

Nigeria is actively exploring solutions to consolidate its diverse exchange rate system, which has historically been employed to artificially bolster the strength of the naira.

In a recent address to members of his governing party, President Bola Tinubu conveyed a decisive message, affirming that Nigeria is poised to bid farewell to its practice of maintaining multiple exchange rates. The President emphasized the country’s commitment to streamlining its currency valuation system, signaling a shift toward a more unified approach.

Following Tuesday’s trading at approximately 465 naira, the value of the naira experienced a decline, reaching as low as 475 nairas against the U.S. dollar. However, the currency showed signs of recovery, stabilizing at around 466 naira per U.S. dollar.

According to reports from traders, the central bank granted permission for currency trading to occur as low as 475 nairas per dollar on the official market. This adjustment extends beyond the previous band of 460 to 467 naira per dollar, providing traders with a slightly wider range for transactions.

Historically, the central bank has implemented a strategy of permitting the gradual depreciation of the naira in increments of 5 nairas.

To mitigate the impact of a significant devaluation, the central bank has been employing a gradual adjustment approach in the official market concerning the naira. By implementing incremental changes, the bank aims to prevent a sudden and substantial devaluation of the currency.

In response to media reports of a substantial decline in the currency following a meeting between Tinubu and the central bank governor, the central bank issued a denial last Thursday, refuting any devaluation of the naira.

Mouad Boudina

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