What to know about Naira ‘devaluation’, Nigeria’s unclear exchange rate policy

Over a week ago, Nigeria’s finance minister, Zainab Ahmed, stirred controversies when she said that Nigeria had adopted a new flexible exchange rate policy for official transactions.

“The government will start to use the flexible rate, that has until now applied to investors and exporters, for government transactions too,” a report by Bloomberg quoted Mrs Ahmed as telling journalists at the State House in Abuja.

“Within the government and the central bank, there is only one official rate and that’s the Nafex rate.”

The minister, by implication, suggested that the government had effectively devalued the naira yet again, just barely a year after the local unit was devalued twice. But the Central Bank of Nigeria swiftly denied the claim.

Speaking at the end of the Monetary Policy Committee’s meeting last Tuesday, the CBN governor, Godwin Emefiele, said the report suggesting the bank had embraced a flexible exchange rate regime and harmonised the different rates was false. Mr Emefiele said the central bank still maintained ‘managed float’, which allows it to intervene in the market occasionally.

“Let me repeat that Nigeria had not changed from its foreign exchange management policy. Nigeria remains on a managed float,” he said.

“What the managed float regime means is that the CBN, being the institution that has the core mandate for forex administration in the country would watch the market and see how the market operates. Depending on its reading, it would come from time to time to intervene in the forex market.”

Within the same period, Vice President Yemi Osinbajo was also quoted to have said that payments made as part of the federal allocation would use the market foreign exchange rate.

“To the questions around whether we’re just going to float the currency, what the finance minister said is that payments for federal allocation will use the … market rate,” Mr Osinbajo said.

In the middle of the contradictions in policy statements on the part of the CBN and finance ministry, here are eight things to note about the nation’s foreign exchange regime:

1. CBN won’t disclose the official rate it now operates: The first takeaway from the controversy is that the CBN appears to be concealing the exchange rate it now operates as the official rate. At the press briefing on Tuesday, the CBN governor, Mr Emefiele, merely implied that the apex bank still maintains the “official rate” of N379 as…