The provided information explains the changes in Nigeria’s foreign exchange market and the shift towards a more unified and market-driven approach. As of August 29, 2023, the exchange rate for the Naira to the US Dollar was as follows:
- Opening rate: ₦769.66 per USD
- Closing rate: ₦775.34 per USD
These rates were based on the data released on the FMDQ Security Exchange, which is the official forex trading portal in Nigeria. The Central Bank of Nigeria (CBN) had announced the unification of various FX market segments into the Investors and Exporters (I&E) window, allowing eligible transactions to access foreign exchange at this window based on market-driven rates.
The changes introduced by the CBN include the abolishment of segmentation, re-introduction of the “Willing Buyer, Willing Seller” model, determination of operational rates for government-related transactions based on weighted average rates, and more transparent trading mechanisms such as order-based two-way quotes and reintroduction of Order Book. The operational hours for trades were set from 9 a.m to 4 p.m, Nigeria time.
These operational changes signify that Nigeria has moved towards a free-floating exchange rate system, where the exchange rate is determined by market forces without significant intervention from the central bank. This approach allows the local currency, the Naira, to float freely against other currencies, which can result in fluctuations based on supply and demand dynamics in the foreign exchange market.