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Business News

CBN reports it has “floated” the Naira

@centbank signaled it has floated naira, which implies that the Naira exchange rate will now be fully determined by market forces of demand and supply.

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The Central Bank of Nigeria (CBN) has declared that Nigeria currency (Naira) exchange rate is now floated, which implies that the Naira exchange rate will now be fully determined by market forces of demand and supply.

Exchange rate float: According to the information obtained on the CBN website, the exchange rate data on the CBN macroeconomic indicator’s section has been removed and replaced with “The Naira exchange rate is market-determined“. A market-determined exchange rate is often referred to as one that is floating or a floating exchange rate.

The website has reflected this change since May, leading some analysts to opine that the CBN may have surreptitiously decided to float the naira.

CBN macroeconomic indicators, as at Tuesday, 11 June 2019; 5:47 pm

But a further click into the link shows the exchange rate remained between N305 and N307, which is the Central Bank’s official rates. This has also been the same rate it has sold dollars for over two years since the last depreciation. So why then is the CBN informing the market that “the Naira exchange rate is market-determined”?

Was it an error or is it sending a subtle signal to the market that it has finally agreed to adopt a market-driven exchange rate?

More details: There are multiple exchange rates in Nigeria. The Central Bank’s official rate is (was) N305/$1 which is also published on its website and has been that way for years before the latest change depicted above.

Meanwhile, the parallel market (bureau de change) is the most patronized for individuals, travellers and even businesses. In the parallel market, price is specifically determined by market forces of demand and supply.

Note that in 2017, CBN officially introduced a multiple exchange rates system, which added the establishment of the Investors’ & Exporters’ FX (I&E) window to the existing official bank rate. According to CBN, the move was a continued effort to deepen the foreign exchange (FX) market and accommodate all obligations.

“The purpose of establishing the I&E FX market is to boost liquidity in the FX market and ensure timely execution settlement for eligible transactions.”

British airways

In the I&E window, the supply of foreign currency to the window is done through portfolio investors, exporters, Authorised Dealers and other parties with foreign currency to exchange naira. Also, CBN is a participant to promote liquidity and ensure professional market conduct. The I&E window is market determined and is viewed as a major reason for the stable exchange rate currently seen in Nigeria.

The Bottom Line: While the CBN is yet to issue an official statement to the change in the Nigeria exchange rates system, what this suggests is that the CBN has finally accepted that the exchange rate will henceforth be determined by the forces of currency demand and supply. Perhaps, the CBN is bracing itself for a possible exchange rate convergence in the no distant future.

Nevertheless, CBN has continuously intervened by injecting billions of dollars to defend the naira due to excess demand for the dollar. Whether this means CBN will stop intervening in the FX market remains yet unknown.

Stanbic 728 x 90

Note: This article was updated on June 12 to reflect new information

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Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

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    Appointments

    Standard Bank Group appoints Yinka Sanni as new Chief Executive of Africa Regions

    Yinka Sanni has been appointed as Standard Bank Group’s Chief Executive of Africa Regions.

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    Stanbic IBTC declares N10.4 billion interim dividend

    The Standard Bank Group has announced the appointment of Yinka Sanni as the new Chief Executive of Africa Regions.

    This announcement was made by the Group in a post shared via its official LinkedIn account. The bank revealed that Sanni will be replacing Sola David-Borha who is retiring after 31 years of distinguished service to the group.

    His appointment will play an integral role in driving the growth of the Standard Bank Group in Africa further in the years ahead.

    He is expected to build on the work of David-Borha, a renowned professional who played a key role in growing the Group’s Africa Regions portfolio in terms of capacity, market share and contribution to the group’s headline earnings.

    What you should know

    • Yinka Sanni is a Fellow of the Chartered Institute of Stockbrokers of Nigeria.
    • He has served in key positions within the Stanbic Group, as the Chief Executive of Stanbic IBTC Holdings PLC, Chief Executive of Stanbic IBTC Bank PLC, Deputy Chief Executive of the Bank and Executive Director, Corporate & Investment Banking of the Bank.
    • He was also the pioneer Chief Executive, Stanbic IBTC Pension Managers Limited and the pioneer Chief Executive, Stanbic IBTC Asset Management Limited.

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    Corporate Press Releases

    P2P crypto marketplace, Bitzlato (BZ) partners with Lemonade Finance to ease money transfers across Africa

    The partnership will enable users on the BZ platform to buy and sell bitcoins and other cryptocurrencies on the marketplace at zero cost.

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    Bitzlato (BZ), the latest P2P Crypto Exchange to enter the African market, has added Lemonade.Finance, a borderless payment platform for Africa, as a payment method to its platform.

    Lemonade Finance provides 100% digital payment experience for Africans to seamlessly participate in the global economy from anywhere in the world without any hassle or regardless of where they are from.

    The partnership will enable users on the BZ platform to buy and sell bitcoins and other cryptocurrencies on the marketplace at zero cost.

    Users in Nigeria will now be able to send Nigerian Naira (NGN) to MPESA at 0% transaction fee.

    Speaking about this partnership, Ridwan Olarere, CEO, Lemonade Finance, said:

    “We are excited to partner with such an innovative company like Bitzlato to connect more Africans through payment. Many Africans living on the continent face many difficulties when making payments as remittance companies charge high fees and are time-consuming. We are now providing our users with a cost-effective way of sending money to Ghana, Kenya, Uk and Europe.”

    Commenting on the opportunities this provides to crypto traders on the BZ platform, Mike Lunov, CEO, BZ, said:

    “This partnership will provide a much-needed gateway that enables the markets we serve to seamlessly interact with each other in a borderless and open environment. We seek to break the barriers that presently exist for cross border transfers and enable our users to generate value through the opportunities that accrue from cryptocurrencies trading. The innovation exhibited by the Lemonade platform, and the brilliance of its team assures users of top-notch, secure and reliable transfers going forward.”

    Hotflex

    According to BZ, during the first month, BZ will refund commissions in manual mode while using Lemonade Finance, but this will be automated at the end of this period.

    Following this partnership, BZ is now looking to partner with merchants in the crypto space especially in Nigeria, Ghana, South Africa that have a steady flow of Nigerian Naira (NGN) to increase liquidity on the platform.

    British airways

    Take advantage of the new Lemonade Finance payment method on BZ, which offers zero transactional fees for money transfers from Nigeria into Kenya. Sign up on BZ and start trading crypto easily today.

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