The Nigerian Central Bank just made a tiny adjustment to its exchange rate peg to the dollar Reuters reports. The CBN on its website adjusted the rate at which it sold hard currency this week from 197 to 196.95 to the dollar.
According to the article, one economist said the move may suggest the bank is testing out the market to see whether it is ready for a looser currency regime.
“Small changes in the rate could possibly allow the central bank to gauge the changes in demand and supply dynamics which would inform decisions on when and how best to start lifting forex restrictions,” Cobus de Hart of South Africa’s NKC Independent Economists said.
The bank itself said the move simply reflected the state of dollar supply.
“We are not fixing rates. The present rate is a reflection of the level of dollar supply in the market,” central bank spokesman Ibrahim Muazu told Reuters.
One other economist said the move would hurt the country’s precarious forex reserves position, however.
“By lowering the central bank rate offered to banks albeit very moderately, the central bank is adding to pressures on FX reserves … equivalent to around 4.9 months of imports,” Angus Downie, head of research at Ecobank said.
Is this clearest signal yet that the Naira will soon float?