To access their $1.5b loan, the World bank gave Nigeria the condition of fulfilling a single exchange rate window requirement. To this effect, the CBN announced that it will continue to pursue foreign exchange unification around its Nafex rate. The NAFEX rate is the forex window where Investors and Exporters transact dollars on market-determined prices.
The apex bank has been considering the option of unifying the exchange rate around the NAFEX (I&E) window rate or the official CBN rate of N360/$1. However, the CBN Governor suggests they are leaning heavily on unifying along the lines of NAFEX.
Other than to access the World Bank loan, an important aim of unifying the exchange rate is to generate more revenue and sustainably manage forex rates. The IMF had previously pointed out the unification will impact the economy more positively than the multiple exchange rates, which creates a lot of opportunities for arbitrage. The unification also curtails situations where public and private sector decisions are distorted as a result of fluctuations.
The CBN Governor also pointed out that in December 2019, Nigeria saw a “relatively stable market because the NAFEX rate and rate that the Central Bank does transaction outside the NAFEX was close to themselves.” Furthermore, he insisted that the trades in the black market are counterintuitive, accusing black market traders as those dealing in corrupt practices. He added strongly that the CBN is not about to consider the interests of the illegal market traders, talk less of unifying along the black market rates.
Relating to the World Bank loan, Nigeria’s Finance Minister Zainab Ahmed said on Tuesday that the country was working towards meeting the unification requirement and coming up with a plan to determine the process and timeline. This was revealed during a webinar organised by the Federal Ministry of Finance, Budget and National Planning, OSSAP-SDGs and UNDP Nigeria with the title ‘Integrated National Financing Framework for Sustainable Development’.