The Central Bank of Nigeria has clarified that its recent monetary policy decision is a managed float and not a free float, according to Deputy Governor Kingsley Obiora in a recent interview with Bloomberg in Rabat, Morocco.
In the interview, Deputy Governor Obiora explained that the central bank wants to provide clarity on the nature of the monetary policy decision. He also expressed caution in determining whether the exchange rate of the naira to the dollar has reached its lowest point, indicating that it may be too early to make such a determination.
Obiora further revealed that Nigeria plans to announce additional measures to loosen foreign exchange controls in the coming weeks. He emphasized that Nigerians should expect more policy changes in the near future.
Regarding the foreign exchange markets, Obiora stated that the Central Bank of Nigeria has not intervened since the new policies were introduced. He also clarified that the central bank has no plans to set the Naira on a completely free float, as no country operates with a completely free float exchange rate.
The deputy governor’s comments provide insight into the central bank’s intentions and signal upcoming policy adjustments aimed at enhancing the foreign exchange system in Nigeria.
“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.”
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.
Nigeria’s exchange rate and the Investor and Exporter (I&E) window fell to N770.38/$1 on Monday as the foreign exchange market in Nigeria experienced significant volatility following the Central Bank of Nigeria’s (CBN) operational changes.
The move to allow market-determined forex rates is seen as a major step towards currency reforms in Nigeria, which has been plagued by a chronic shortage of foreign exchange and multiple exchange rates.
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.