Key questions this article answers:

  1. Two days ago, the Central Bank of Nigeria released new policy guidelines ending a 6-year multi-market system for foreign currency trading. How will the new policy change affect businesses?

  2. CBN’s new policy guidelines bring Nigeria closer to a unified exchange rate regime. Why is this regime necessary, and how will it impact Nigerians?

The biggest financial news in Nigeria this week has to be the Central Bank of Nigeria (CBN) reforming the foreign exchange (fx) trading in the official windows. It’s been a long time coming, and finally, Nigeria is one step closer to the much-anticipated exchange rate unification.

Although the CBN—the country’s sole monetary authority—made this move, President Tinubu’s actions were consequential to the exchange rate reforms. His remarks about unifying the foreign exchange windows during his inaugural speech signalled that he favoured it. And the suspension of the CBN governor, Godwin Emefiele, hit the nail in the coffin. This Tinubu presidency is certainly not a Buhari presidency, at least in this regard.

While this reform is a step in the right direction and inspires confidence in the fx market, its worth noting that the federal government’s interference inspired it—something that impedes the CBN’s independence.

But what does this new reform mean? Does this new exchange rate regime mean manufacturers can now approach their commercial banks to get foreign exchange and no longer rely on the parallel market for their foreign exchange needs? Or does it mean Nigerians will use their naira cards to spend abroad in Summer ‘23? 

Let’s dig in.