Nigeria’s naira currency plunged by more than 36% against the dollar on Wednesday on the official market, after authorities in Africa’s largest oil producer scrapped multiple exchange rates that had been widely criticised.
The central bank announced that all foreign exchange transactions would now take place at its Investors and Exporters (I&E) window, where buyers and sellers can agree on prices freely. It also said it would use a weighted average of previous day’s trades as the operational rate for government-related transactions, and reintroduce order-based quotes with a central clearing system.
“This is a very positive move that will boost Nigeria’s assets and current account, as well as improve its long-term investment climate,” said Charlie Robertson, head of macro strategy at FIM Partners. “The currency was overvalued by 50% before, now it is only 5-10% cheap.”
The naira hit a record low of 750 to the dollar on Wednesday, compared with 477 naira on Tuesday, according to Refinitiv Eikon data. This was equivalent to the black market rate, which had been around 750 naira since last year. This was also the first major devaluation since 2016, when the central bank introduced a managed float regime in 2017.
The decision came days after President Bola Tinubu suspended central bank governor Godwin Emefiele, who had defended multiple exchange rates as a way to keep the naira stable. Tinubu had vowed to reform the economy and end distortions caused by inefficient pricing of foreign exchange. He had also promised to remove a popular fuel subsidy that drained public funds.