The Nigerian currency's official exchange rate versus the U.S. dollar plunged to an all-time low of NGN634 per greenback on June 14.
A few days earlier, the Central Bank of Nigeria (CBN) had denied that the currency exchange rate would devalued from N470 to N631 per dollar, after which the naira fell by more than 30 percent. The CBN's decision to allow the naira to "float" also comes just weeks after Nigerian President Bola Ahmed Tinubu promised to end the central bank's multiple exchange rate regime.
Before the central bank's apparent devaluation of the naira, Nigeria's apex bank had kept the naira below NGN500:USD1 for more than a year. Meanwhile, the naira was trading between USD1:NGN600 and USD1:NGN800. During this period, the central bank is known to have refused to devalue the naira on several occasions.
In a tweet posted by the Central Bank of Nigeria on June 16, the bank explained to Nigerian residents and businesses why a flexible foreign exchange rate was needed.
"The I and E [import and export] market functions by a willing buyer willing seller system, where an entity with demand for FX seeks out another entity with foreign exchange to sell at an agreed price through an authorized dealer," the Bank said.
The Central Bank of Nigeria also said the country's other foreign exchange rate regimes would "cease to exist."
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