FX rates harmonisation: CBN abandons unification policy, re-introduces discriminatory rates

The Central Bank of Nigeria (CBN) may have discreetly abandoned the much-commended foreign exchange (FX) rate harmonisation less than a year after the policy direction was announced by the authority, market data have suggested.


Besides the black market rate, which is independent of the CBN operation, three distinct rates, previously submerged by the convergence policy, have resurfaced – BDC, NAFEM and Customs duty rates.

At the weekend, the Nigerian Customs Service (NCS), which takes instruction from the CBN, relaxed the benchmark rate for duty clearance to N1,164/$, subsidising the exchange rate for importers by as much as over 10 per cent or N175 per dollar. Last week, trading at the Nigerian Autonomous Foreign Exchange Market (NAFEM), the anchor of the single-trading window, closed at N1339.23/$.

At the height of the FX crisis in March, the CBN and NCS snubbed dissent views and adopted the spot rate for import duty transactions, with the benchmark exceeding N1600/$ at some point.

Besides importers, bureau de change (BDC) operators have benefited from the bank’s ‘new’ generous FX subsidy. For the fourth time last week, the bank sold close to $16 million to its pre-qualified BDC at N1,021 per dollar.

At the time the monetary authority communicated with the Association of Bureaux de Change Operators of Nigeria (ABCON), the naira was trading above N1200/$ at both NAFEM and the parallel market.

Previously (since the comeback of BDC funding in February), the CBN had intervened in the retail market through the operators about four times, selling below the official prices each time.

Some experts suggested that the intervention in the market was a major reason the dollar had buckled at the black market in recent weeks, selling at a discount compared to the official rate.


Already, there are concerns that discriminatory rates would upset the market in the coming time even as sources confided in The Guardian yesterday that the international institutions, which commended the pro-market reform in the FX market, are raising eyebrows about the relapse to the old practice.

The CBN under Godwin Emefiele, for several years, had a running battle with the International Monetary Fund (IMF), the World Bank and other development partners over the adoption of anti-market FX management approaches.

The organisations blamed the draught in foreign exchange inflow on wide arbitrage between the official and black market rates, which hit 100 per cent at a critical stage of the crisis last year. The Fund pegs caps FX market arbitrage at five per cent.

But less than a month after Emefiele was removed, the CBN under Folashodun Shonubi, pulled the plug off the overvalued naira and adopted the neoclassical recommendation (rate convergence and liberalisation).

Subsequently, the naira plunged at both official and parallel markets but the Central Bank held on to its gun justifying the adoption of market reforms and rate convergence around NAFEM, which was created as the single-window platform.


The introduction of new guidelines for the operation of BDC operators raised suspicion about the CBN’s commitment to the reform while the resumption of their funding confirmed the fear.

Amidst the new worry over the lack of clear official direction, the Senate Committee on Finance has offered to work with concerned authorities, including the CBN, on policies that would restore stable naira and guarantee in the entire market even as it also expressed worry over the fresh crisis.

In a statement issued yesterday, the Chairman of the Committee, Mohammed Sani Musa, said the committee was monitoring the situation and committed to working with relevant stakeholders to implement effective policies and strategies to tackle the issue. He disclosed that the committee “is exploring a range of policy options to mitigate the impact of naira depreciation and foster economic stability”.

“The Nigerian economy is facing significant challenges, exacerbated by both internal and external factors. Despite efforts to stabilize and bolster economic growth, the numerous initiatives and bold but necessary steps and policy decisions taken by President Bola Ahmed Tinubu, the persistent depreciation of the naira against major foreign currencies has become a pressing concern.

“The recent depreciation of the naira underscores the need for proactive measures to safeguard the stability and resilience of our currency. The Senate Committee on Finance is closely monitoring the situation and is committed to working collaboratively with relevant stakeholders to implement effective policies and strategies.

“It is imperative that we address the root causes of Naira depreciation, including but not limited to fluctuations in global oil prices, fiscal deficits, and structural imbalances in the economy. Furthermore, we must continue to enhance transparency and accountability in our fiscal management processes to instil confidence in investors and promote sustainable economic growth,” the statement read.


It also called on the national economic managers to adhere strictly to the norms and standards set by the administration to ensure that we achieve the desired outcomes.

“As we navigate these uncertain times, I urge all Nigerians to remain vigilant and resilient. Together, we can overcome the challenges facing our economy and chart a path towards prosperity for all,” Musa said.

Naira is at risk of losing the gains recorded in the past two months. The modest gains had turned global attention to the local currency with the prediction that the naira could emerge as the best-performing currency this year.

At the IMF/World Bank Spring Meetings in Washington last two weeks, the CBN Governor, Yemi Cardoso, attributed the gains to the convergence of the different rates.

According to him, the FX market in Nigeria has seen a surge in activities with turnover levels reaching highs not observed in over seven years. The heightened liquidity is believed to instill confidence among investors, businesses and partners, facilitating smoother transactions within Nigeria’s FX markets.

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