CBN Announces Technical Devaluation of the Naira

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The Central Bank of Nigeria , has announced the technical devaluation of the naira, Ayodeji Ebo, head of research at Afrinvest West Africa Ltd., has said.

Reacting to the apex bank’s decision to leave the naira to market forces,according to Bloomberg, Ayodeji said it is a technical Devaluation.

He said “The objective is clear. It will open up the foreign-exchange market, once there is liquidity.”

CBN had said it would make dollars available to companies importing “critical” materials, while others would have to buy foreign currency in the market. Details of how the new system will operate have yet to be determined.

“If my interpretation’s right, they’re not going to throw away their reserves trying to manage the exchange rate and they’ll let the market determine that exchange rate,” Charles Robertson, London-based chief economist at Renaissance, added.

“They’ll allocate dollars to those key sectors that will help Nigeria change the structure of its economy, probably agribusiness, industry and oil refineries,” Robertson said. “It sounds like the right policy stance to get Nigeria working again, although they’ll be an inevitable lag as devaluation always carries some short-term pain.”

 

Posted on May, 25 2016

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