Currency still in limbo as float policy takes effect [UPDATE]

folarin okunola

June 20, 2016 4:29 PM

Last week, CBN governor, Godwin Emefiele, announced the apex bank's new policy direction for the Naira, saying that the bank had decided to let market forces determine the real value of the currency.

Central Bank Governor Godwin Emefiele speaks during the monthly Monetary Policy Committee meeting in Abuja, Nigeria January 26, 2016.

Today, Monday, June 20, 2016 marks the beginning of the new policy of the Central Bank of Nigeria (CBN) to "float" the Naira, after pegging the currency at N197/Dollar for the last 16 months.

Last week, CBN governor, Godwin Emefiele, announced the apex bank's new policy direction for the Naira, saying that the bank had decided to let market forces determine the real value of the currency.

Essentially, this meant that there would only be one market - the interbank market - for foreign exchange, with the CBN intervening (i.e buying or selling, as the case may be) from time to time to steady the market. News of the new policy direction was received with mixed reactions by the public, some (including a lot of international experts) applauding the move, while others opined that it should've happened sooner.

Today, the 'floating' of the Naira began in earnest and various reports (from Reuters to the Financial Times) have revealed that the Naira has depreciated (or appreciated, depending on which end you're looking at it from) from between 23-27%.

ALSO READ: Currency trades at N255 after CBN's 'managed float', experts project positive future

This means that, from a CBN perspective, the Naira has depreciated about 23-27% in value; while from a parallel market angle, it has appreciated from N350/Dollar, which it traded at last week, to about N255 - N260 today.

"The float has not reflected across the board yet. We are still using N380 for Western Union and Moneygram transactions," a source from First Bank Nigeria (FBN), who asked not to be named told me.

Earlier today, a Google search of the Naira exchange rate showed that the Naira was trading at N198. A few hours later, when I checked back it had shot up to N260.

Another source - a business owner, who also didn't want to be named said, "The effects of the float are not being felt by the mass public just yet. In fact, almost anywhere you go, it's still business as usual. We will have to wait and see what happens in the coming weeks."

In other words, the possibilities of the Naira float are yet to fully manifest. We will have to wait and see in the coming days, the real effect the CBN policy to float the Naira has on the economy and business in Nigeria. In the meantime, the Naira closed at N345/Dollar, N480/Pound Sterling, N380/Euro on the parallel market at the close of business even though a lot of parallel market traders were closed pending when the float would take full effect. On the interbank market, the Naira traded at N260 as at the close of business, with many reports suggesting that very little trade was undertaken across the sector as a whole.

For all the latest updates on forex and the Naira, stay with Pulse Money. Also, if you have any tips and/or information regarding the floating of the Naira or its effect on businesses around you, send an email to info@pulse.ng.

folarin okunola