CBN Officially Devalues Naira: New Exchange Rate Introduced by CBN

The Central Bank of Nigeria (CBN) has taken a significant step towards formalizing the devaluation of the naira by updating the naira-to-dollar exchange rate on its official website. The previous rate of N463 per dollar, which was considered the official exchange rate for investors, importers, and exporters, has now been replaced with a new rate of N632.77 per dollar. This change in the exchange rate became effective on June 14, 2023, specifically for transactions carried out through the Investors and Exporters (I&E) window.

The CBN’s decision to devalue the naira signifies an acknowledgment of the existing economic realities and the need to adjust the official exchange rate to reflect market dynamics. With the new rate now in place, the CBN aims to align the naira’s value more accurately with international currency markets. This move is expected to have an impact on various sectors of the economy, including import and export businesses, as well as foreign investors operating in Nigeria.

The CBN has also provided updated exchange rates for other major currencies. The British pound, for instance, was quoted at N799.75 per pound, compared to the previous rate of N581.52. Similarly, the euro saw a significant shift from N498.94 before the devaluation to N683.48 as of June 14, 2023.

In a circular issued by the CBN on June 14, 2023, it was stated that all exchange rates in Nigeria would now follow a “willing buyer, willing seller” arrangement at the I&E window. According to the circular, the operational rate for all government-related transactions will be the weighted average rate of the previous day’s executed transactions at the I&E window, calculated to two decimal places.

The introduction of the I&E window by the CBN, initially proposed by the suspended governor, Godwin Emefiele, was aimed at enhancing liquidity, improving the functionality of the foreign exchange market, and ensuring the efficient execution and settlement of forex transactions.

This recent move by the CBN represents a shift towards unifying the exchange rates in Nigeria. By adopting the rates provided by the I&E window, the CBN aims to create a more transparent and market-driven foreign exchange system. This decision to abolish the parallel and other forex markets reinforces the CBN’s commitment to streamlining foreign exchange transactions and fostering stability in the Nigerian economy.

In conclusion, the Central Bank of Nigeria’s decision to officially devalue the naira and introduce a new exchange rate demonstrates its recognition of the economic realities and the importance of aligning the currency’s value with international market forces. This move aims to enhance the efficiency and transparency of the foreign exchange market, thereby attracting foreign investments and promoting economic growth in Nigeria.

FAQs

1. What is the new naira-to-dollar exchange rate introduced by the CBN? The new naira-to-dollar exchange rate introduced by the CBN is N632.77 per dollar.
2. When did the new exchange rate take effect? The new exchange rate became effective on June 14, 2023.
3. What is the Investors and Exporters (I&E) window? The I&E window is a platform introduced by the CBN to facilitate foreign exchange transactions, improve market liquidity, and ensure efficient execution and settlement of forex transactions.
4. Why did the CBN decide to devalue the naira? The CBN’s decision to devalue the naira reflects the need to align the currency’s value more accurately with international currency markets and address the economic realities of Nigeria.
5. How will the new exchange rate affect businesses and investors? The new exchange rate will have an impact on import and export businesses as well as foreign investors operating in Nigeria. It is essential for businesses and investors to assess the implications of the devaluation on their operations and adjust their strategies accordingly.