Nigeria: Central Bank eases forex rate controls

Nigeria: Central Bank eases forex rate controls

Flexible exchange rates are seen by many as a step towards devaluation of the local naira currency

By Rafiu Ajakaye

LAGOS, Nigeria (AA) - In a move many analysts saw as moving towards devaluation, Nigeria's Central Bank on Tuesday announced a regime of “flexible exchange rates” to let market forces determine the value of the local naira currency instead of the bank pegging it.

The bank also kept the interest rate at 12 percent.

"The committee noted that it was time to introduce greater flexibility in the foreign exchange market," Central Bank Governor Godwin Emefiele told reporters after a two-day meeting of the bank's Monetary Policy Committee in the capital Abuja.

"The committee said in the period of stagflation, the options are very limited, the committee decided on the least risky option. The MPC voted unanimously to adopt a flexible exchange rate policy," he added.

The governor however stopped short of announcing outright devaluation of the local currency -- officially pegged at 197 to the dollar -- although analysts said the talk about “flexible exchange rates” simply goes down to devaluation of the naira.

"What all this means is that the government is shifting position from its rigid exchange rate policy. I expect to see them officially devalue the naira in the coming days," Atiku Samuel, an economist, told Anadolu Agency.

The governor also said the economy is closer to recession as the country's GDP shrank 0.36 according to the latest data by the National Bureau of Statistics.

"The conditions that led to the contractions in the first quarter of 2016 were still largely unresolved. The recession which was signaled in July 2015 now appears imminent," according to the governor.

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