The Central Bank of Nigeria (CBN) has adopted the Investors and Exporters (I&E) window rate, sources close to the apex bank disclosed after the bank took down the old rate from its website.
The CBN’s adoption of the Investors and Exporters (I&E) as the official rate would help Nigeria’s economic recovery as it would help boost investor confidence which has been lacking for some time.
Razia Khan, managing director and chief economist, Africa and Middle East Global Research at Standard Chartered Bank is of the view that the move will be beneficial for an economy still licking its wounds from the second recession in five years.
“It would bring financial benefits to Nigeria, helping to boost the naira-value of any USD-denominated revenue from oil,” Khan said.
It would allow the FX rate to act as a ‘shock absorber’, by compensating for the weakness of oil earnings, according to Khan.
“If an official devaluation were accompanied by measures to boost the functioning of the I&E window, it would ultimately help Nigeria’s economic recovery,” she said.
The Central Bank of Nigeria (CBN) on Friday however said it had since last year adopted the Investors and Exporters (I&E) foreign exchange rate, which hovers around N410 and N411 but forgot to remove the old rate of N379 per dollar from its website.
A source close to the CBN disclosed this to BusinessDay on Friday, following the removal of the N379 per dollar official exchange rate which the CBN had retained since August 2020 following a devaluation.
Traders said the naira weakened to a record low against the dollar on the official market on Friday, as many interpreted the move as a precursor to unify multiple exchange rates.
Having traded within a band of 380 and 381 to the dollar since July last year, the naira hit a record low of 419.75 against the dollar on Friday. It then closed at N411.25 — the last closing rate for the naira on the over-the-counter spot market. That’s at par with the rate at the I&E window.
The adoption of the somewhat market-driven exchange rate by the CBN was in response to the pressure from the International Monetary Fund (IMF) and the World Bank, which demanded unification of exchange rate as a precondition for approval of $3.4 billion and $1.5 billion, respectively, loan request by the Nigerian government.
On the impact of the development on the economy, Ebo said, “I don’t envisage any major impact on the economy as most business transactions are done mostly using the I&E window and the unofficial market. This has further given prominence to the I&E window FX rate”.
On April 21, 2017, the CBN introduced the I&E window, also known as the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) to boost liquidity in the market and ensure timely execution and settlement of eligible transactions.
The CBN and non-bank corporates have been the major supplier of dollar, providing more than 90% of foreign exchange inflows at the I&E window.
With the adoption of the I&E window as the official exchange rate by the CBN, it means that naira has been adjusted by 8.44 percent from N379 to about N411.00k the current rate at the NAFEX window.
Naira/dollar exchange rate closed at N411.67 on Friday, representing 0.10 percent lower than N411.25k closed on Tuesday before the two-day holiday declared by the Federal Government.