The Central Bank on Wednesday announced its much awaited flexible exchange rate policy where it officially abandoned the currency peg and chose to officially float the naira. The new was welcomed by most analysts and investors with the stock market surging by over 3.5% at the close of trading on Wednesday.
As the excitement trailing the news beings to dissipate speculations will shift towards what price the dollar might sell for when the new interbank market eventually opens up by June 20th, 2016. Already, a report by Reuters is suggesting that the dollar could trade for as high as N370.
The interbank market, which has been trading around a pegged rate for 16 months, is likely to start trading on Monday at a rate between the fixed rate of 197 and the black market rate of 370 to the dollar, according to a treasury source quoted by Reuters.
The market is expected to be quite volatile on Monday with the price expected to rise and fall to the dictates of demand and supply. We believe the price of the Naira could settle at about N350 at the close of trading on Monday and will remain between the N330 to N350 band for some days before it starts to drop again.
Reuters also reports that currency dealers in Nigeria will meet on Thursday to discuss new forex guidelines issued by the central bank. The meeting, hosted by the association of currency dealers, the Financial Market Dealers Association (FMDA), will seek to determine trading spreads for the currency and circuit breaker, according to Reuters.