Nigeria’s naira recorded a historical plunge after being floated freely

The decision by the Central Bank of Nigeria (CBN) to float the naira freely has come with an unwanted outcome: a historical fall of the value of currency against the US dollar.

Intended to curb dollar scarcity and curtail parallel forex exchange markets, the move has sent the naira down by 36% on the official market on June 14. The new policy removed trading restrictions on the official market, forcing the naira to go from 477 per US dollar on June 13 to 750 on June 14. As of June 15, the black market rate stood at 760 per US dollar.

As buyers and sellers of foreign currency in the official forex market continue to quote rates they find comfortable, compared to previous practice where rates were dictated by the Nigeria central bank, the naira could reach 800 against the US dollar.

Though it remains a wait-and-see situation, analysts expect the currency float to help close the gap between official and parallel market exchange rates, boost investor confidence, increase foreign inflows, reduce import costs, and ease pressure on the naira.