On 14 June 2023, the Central Bank of Nigeria (CBN) issued a press release notifying all authorised dealers and the general public of operational changes to the foreign exchange market.

These changes aim to unify the foreign exchange market and allow the Naira to be traded freely based on market forces. Previously, the CBN maintained a fixed exchange rate regime, artificially pegging the value of the Naira at a specific rate and requiring banks and the public to conduct foreign exchange transactions at that fixed rate, which did not accurately reflect actual market conditions.

This fixed rate approach, coupled with an expanded list of ineligible transactions, led to the emergence of an alternative parallel foreign exchange market, where the Naira traded freely based on supply and demand dynamics. The disparity between the official rate and the rates in the alternative market became evident.

This client alert, authored by TEMPLARS Partner Zelda Akindele and Managing Counsel Obianuju Ifebunandu delves into the key changes outlined in the CBN press release and provides valuable insights into the potential market implications.