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The Central Bank of Nigeria floats the Naira

By on June 15, 2016

The Central Bank of Nigeria (CBN) Wednesday announced what it termed the “automatic adjustment mechanism of the exchange rate” in a flexible foreign exchange regime aimed at reducing the pressure on the Naira.

Nigeria will allow the embattled naira to trade freely in a move to control the currency crisis in Africa’s most populous nation.

The Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele said: “The Central Bank of Nigeria has always maintained that it would continue to monitor situations on the ground and ensure that the Bank’s policies reflect these facts and developments rather than the sentiments of any groups or sectors.”

“It is in light of this principle that we now believe that the time is right to restore the automatic adjustment mechanism of the exchange rate with the re-introduction of a flexible inter-bank exchange rate market.” He added.

The new system will come into effect on 20 June and is expected to lead to a significant devaluation of the naira.

The fixed currency rate had created a vast black market for US dollars and squeezed the country’s economy.

Nigeria’s central bank had long been expected to to allow the naira to be more flexible and trade at a market-driven rate.

The naira is fixed at 197 to the US dollar, but the black market rate has soared to 370 in recent months.

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