Nigeria's naira has plummeted to an all-time high against the dollar after a change in the way exchange rates are set, effectively devaluing the currency for the second time in seven months.
The local currency fell 31% on Monday to 1,413 naira to the dollar at the so-called NAFEX fixing, the official foreign exchange window, according to data released by FMDQ, which calculates exchange rates for the West African country.
This brings the naira closer to the parallel market rate of about 1,450 naira, following a nearly 30% devaluation in June when the Central Bank of Nigeria liberalized the currency system to increase capital inflows and liquidity.
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Africa's biggest oil producer has been battling exchange rate fluctuations since foreign currency reform in June. The central bank blamed a lack of dollar liquidity for exacerbating the volatility and pledged to increase supply to ease pent-up foreign currency demand.
Rand Merchant Bank economists said in a client note, citing FMDQ, that the change in pricing methodology “addresses recent fluctuations in currency markets and ensures that interest rates accurately reflect market conditions while maintaining price formation and transparency.” The aim is to reflect this in the future. “The CBN reiterates its commitment to settle all legitimate foreign exchange balances in the short term and is implementing strategies to improve liquidity in the foreign exchange market.”
A central bank spokesperson did not respond to a request for comment.
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