The Economist Intelligence Unit (EIU), an affiliate of The Economist of London, has predicted that the Nigerian government will return to a system where it has more control over exchange rates.
According to Business Day, the EIU made this prediction in its latest report on Nigeria’s currency, the naira.
Last month, the Central Bank of Nigeria (CBN), following a directive from the federal government, announced the unification of all segments of the foreign exchange (FX) market, signaling the end of control over the foreign exchange market. forex market. Since then, the local currency exchange rate has been determined by market forces.
The apex bank later clarified that the new exchange rate regime is a managed floating and not a free floating system.
The EIU said the CBN, the country’s money-handling agency, does not have much experience in running a flexible exchange rate system.
The research firm said there is currently a shortage of foreign currency in the country, especially when it comes to making foreign currency requests through Forms A and M.
The company said this scarcity combined with speculators taking advantage of the situation could lead CBNs to intervene more and “intervene” in the market, especially when around 98% of their foreign exchange reserves is in cash.