CBN Devalues Naira by 17.26% To N360/$, External Buffer Down $35.9 Bln

The Central Bank of Nigeria (CBN) on Friday officially devalued the nation’s currency at both the official window and the Investors’ & Exporters’ (I&E) FX Window to reflect the reality and conditions of the marker, a top banker told Global Financial Digest.
The regulatory bank has moved the official rate to N360 to the dollar from N307 per dollar previously and now selling dollar to foreign portfolio investors (FPI) at N380.20 at the I&E window from N366 per dollar previously.
Also, the CBN has effectively moved the rate for the bureau de change segment of the market to N380 to the dollar, while the operators are expected to buy dollar from the CBN at N378 per dollar, according to a circular sent to the BDC operators by the apex bank.
With this action, the regulatory bank has effectively unified the foreign exchange rates in the market in line with the recommendations of the International Monetary Fund (IMF).
In the circular sent to BDC, the CBN said proceeds from the International Money Transfer Service Operators (IMTOs) to banks will hence be traded at N376 per dollar, while from banks to the CBN, the rate will now go for N377 per dollar.
The CBN said it will now sell dollars to the BDC at N378 to the dollar while the BDC operators will sell to end-users at N380 to the dollar.
“Please be advised that the applicable exchange rate for the disbursement of proceeds of IMTOs for the period Monday, March 23 to Friday, March 27, is as follows,” the CBN circular signed by the director of Trade and Exchange, O.S Nnaji stated.
There have been speculations in the market in recent time that the CBN may devalue the currency in view of the impact of the Coronavirus and the sharp drop in global oil prices.
The unification of the exchange rate has effectively end almost three years of multiple exchange rates in the market.
Before now, the country has about five different exchange rates; one for offshore investors at I&E window, the other for the official window, another one for the interbank, while the bureau de change operators rate was also different from the rest.
A top banker said: “This is a devaluation. It might also lead to convergence of rates. The question is, is it enough?”
“Today, it is still difficult to buy funds from the market at 380. So let’s see how it goes,” the banker who preferred anonymity told one of our correspondents.
Nigeria’s external forex reserves fell $35.94 billion by March 19, from $38.53 billion, representing a 6.72 percent drop year-to-date.
“The best approach has always been allowing the market to decide. The market will move the price to a level that will create an equilibrium price for both demand and supply and that price that will be appropriate for the market at this point in time considering the environment,” the senior banker said.
He, however, noted that If there is an overreaction to the latest move, the market will correct itself. The CBN May step in extreme volatility to calm the markets by providing supply.