In an investment note to its clients on 17 February, investment banking firm Renaissance Capital disclosed that it had spoken with Nigerian authorities who are finally considering adopting a more flexible exchange rate regime, although the firm did not state when this may be.

The Central Bank of Nigeria (CBN) has come under increasing pressure to act on closing the widening gap between the official and unofficial exchange rate of the US$.

The National Economic Council (NEC) — which is a meeting of governors chaired by acting president Yemi Osinbajo — met on 16 February, and expressed concern over the widening gap, calling on the CBN to close the division between the official and unofficial exchange rates. However, the CBN governor, Godwin Emefiele is said to have pleaded with the governors for more patience. The same day, the CBN announced that it would be making US$20 million available every week to banks to sell to those looking for US$ to cover medicals, school fees, as well as personal and business travel allowances (PTA/BTA). This is in a bid to reduce the pressure on the unofficial market.

But the CBN fixed the exchange rate for such sales at N375 to the US$, which is N70 (US$0.22) above the current official interbank exchange rate. This new rate means that the CBN currently has three official rates for selling the dollars in its custody: the official interbank rate at N305; the PTA/BTA rate at N375; and the bureau de change (BDC) rate at N399 to the US$. The multiplicity of rates has given room for sharp practices with unconfirmed rumours that some people can get notes from the CBN to access the US$ — at the official rate from the banks — and simply sell it at huge profit in the unofficial black market. Even though the CBN has denied these allegations, the huge gap between the official and black market rate provides a significant incentive for such illegal action.

This article has been taken from Menas Associates’ weekly publication, Nigeria Politics & Security.