On Wednesday, Godwin Emefiele, governor of the bank, announced the bank’s decision to remove the peg on the naira and let market forces decide its new position.
“The market shall operate as a single market structure through the inter-bank/autonomous window; the Exchange Rate would be purely market driven using the Thomson-Reuters Order Matching System as well as the Conversational Dealing Book,” he had said on Wednesday.
The naira immediately found strength and appreciated on the parallel market to trade at 365 against the greenback.
“With what the CBN says it will do, the naira has gone up to 365 to the dollar and 500 to one pound,” a bureau de change operator told TheCable from Abuja.
Lukman Otunuga, FXTM research analyst, said the decision to unpeg the naira has sent optimism to the market and was received as a “pleasant surprise”.
“Global markets received a pleasant surprise during trading on Wednesday following the Central Bank of Nigeria’s (CBN) unanticipated decision to de-peg the Naira against the Dollar in an effort to revive economic growth,” Otunuga said.
“For an extended period, the incessant declines in oil prices have slashed the nation’s foreign exchange earnings, while the dollar peg heavily eroded reserves, which simply pressured the nation further.
“With fears mounting that a recession could be pending in Q2 amid depressed oil prices, the central bank’s move to de-peg the Naira may have mitigated some concerns, consequently boosting sentiment.”
He added: “Although the naira may be set to depreciate to unfathomable levels as the natural forces of supply and demand determine its true value on the free floating exchange, this could encourage domestic import substitution, while re-attracting foreign investors.
“As of now, the CBN will need to act with haste by hiking rates, as ongoing naira weakness may punish Nigerians further while causing inflation to spiral uncontrollably.
“As the nation finds normality in the future and slowly diversifies away from being oil-reliant, economic growth should improve and this should naturally boost the value of the Naira that is now on a free floating.”
Stocks at the Nigerian Stock Exchange (NSE) are also rising to record highs, with the All Share Index (ASI) at 28,617.44 at 11:35am on Thursday.
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