• Login
NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
  • Home
  • News
    • General
    • Political
  • Economy
  • Business
    • Agribusiness
    • Aviation
    • Banking & Finance
    • Energy
    • Insurance
    • Manufacturing
    • Markets
    • Maritime
    • Real Estate
    • Tourism
    • Transport
  • Technology
    • Telecom
    • Cyber-security
    • Cryptocurrency
    • Tech-guide
    • Social Media
  • Features
    • Interviews
    • Opinions
  • Reports
    • Banking/Finance
    • Insurance
    • Budgets
    • GDP
    • Inflation
    • Central Bank
    • Sec/Gse
  • Lifestyle
    • Sports
    • Entertainment
    • Travel
    • Environment
    • Weather
  • NRTV
    • Audio
    • Video
No Result
View All Result
No Result
View All Result
NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
No Result
View All Result
Home Business

CBN edges towards free float of naira with discontinuation of cap on forex transactions

1 year ago
in Business, Features, highlights, Home, home-news, latest News
3 min read
0 0
0
45
VIEWS
Share on FacebookShare on TwitterShare on Linkedin

CBN edges towards free float of naira with discontinuation of cap on forex transactions 

The Central Bank of Nigeria (CBN) has announced significant reforms in the foreign exchange market, signaling a stride towards a market-driven exchange rate mechanism, potentially paving the way for a free float of the Naira.  

This follows last week’s circular removing caps on international money transfer operations.  The CBN’s recent circular outlines pivotal changes, including the discontinuation of a cap on the spread in interbank foreign exchange transactions and the lifting of restrictions on the sale of interbank proceeds. 

  •  “A key objective of the ongoing foreign exchange market reforms by the Central Bank of Nigeria is to promote a market-based price discovery system,” the circular states, marking a shift towards a more liberalized forex regime.
  • “Under the new guidelines, forex transactions will operate on a “Willing Buyer and Willing Seller” basis, ensuring more flexibility in the exchange rates determined by market forces. The CBN emphasizes the importance of transparency and ethical standards, mandating that “Authorized Dealers are to continue to conduct their foreign exchange transactions…and to strictly adhere to high ethical standards.” 

 Lifting Caps and Restrictions 

 The circular explicitly states the removal of any cap on the spread between buying and selling prices in the interbank foreign exchange market.  

  • This move is expected to enhance the liquidity and efficiency of the market by allowing more room for price negotiation.  
  • Furthermore, the lifting of restrictions on the sale of interbank proceeds is anticipated to increase the availability of foreign currency in the market. 

Willing Buyer, Willing Seller Basis 

 The CBN has mandated that authorized dealers conduct their foreign exchange transactions on a “Willing Buyer and Willing Seller” basis.  

  • This directive aims to foster a more transparent, competitive, and efficient market, where exchange rates are determined by the market participants themselves, without fixed rates imposed by the regulator.
  • In addition to promoting market-based pricing, the CBN’s circular stresses the importance of maintaining high ethical standards and transparency in foreign exchange dealings.  
  • Authorized dealers are expected to adopt appropriate price disclosures and ensure transparency in transactions, which is crucial for building confidence in the new system. 

What this means 

The move could be interpreted as a step closer to a free-floating Naira, where the currency’s value would be determined by supply and demand dynamics without direct intervention from the central bank.  

While the circular does not explicitly announce a full transition to a free float, the reforms indicate a significant shift in policy direction. 

RelatedPosts

AngloGold Ashanti Doubles Earnings and Free Cash Flow on Higher Gold Prices, Production Surge in Q2 2025

Africa’s Richest Country to Boost Continental Trade Ties After U.S. 30% Tariff Hit

Nigeria Hits Panic Button as West Africa Logs $2.1bn in Suspicious Crypto Transactions

Analysts view this development as a positive step towards aligning Nigeria’s foreign exchange market with global best practices. A market-driven exchange rate mechanism can enhance competitiveness, attract foreign investment, and potentially reduce the volatility associated with forex scarcity and speculation. 

However, the transition to a fully free-floating currency requires careful monitoring and supportive fiscal policies to mitigate potential risks, such as excessive currency volatility and inflationary pressures. The success of these reforms will depend on the implementation fidelity and the overall economic policy framework of the Nigerian government. 

Other implications  

The implementation of the CBN’s foreign exchange market reforms, moving towards a more market-driven exchange rate system, necessitates complementary fiscal policy reforms to ensure the stability and growth of the Nigerian economy.  

Specifically, reducing fiscal deficits and increasing government revenues are critical steps that need to be taken alongside these forex reforms. A reduction in fiscal deficits can help curb inflationary pressures by limiting the need for government borrowing, which often leads to an increase in money supply.  

Increasing government revenues, through measures such as improving tax collection and diversifying the economy away from oil dependency, can provide the government with more resources to invest in critical infrastructure and social services without resorting to excessive borrowing.  

In addition, the shift towards a market-driven exchange rate, as indicated by the CBN’s recent policy changes, has significant implications for inflation and the cost of imports in the short term.  

  • By allowing the Naira’s value to be determined by market forces, prices for imported goods, which are often indexed to the exchange rate, could experience volatility as the market adjusts to the new regime.  
  • This could lead to short-term inflationary pressures as the cost of imports rises, affecting consumers and businesses that rely on foreign goods and services.  
  • However, this policy also has the potential to restore foreign investor confidence and attract much-needed foreign investment into Nigeria.  
  • Additionally, by making imports more expensive, the policy could naturally curb excessive reliance on foreign goods, encouraging the development of local industries and reducing the trade deficit over the long term. 
Source: nairametrics
Via: norvanreports
Tags: CBNCBN edges towards free float of naira with discontinuation of cap on forex transactionsforex transactionsnaira
No Result
View All Result

Highlights

CID Recovers 43 Stolen Luxury Vehicles Smuggled into Ghana

2025 Mid-Year Economic Review: Fiscal Discipline is a Necessary Pain

Ledecky’s Heroics Highlight Underwhelming US Campaign at World Aquatics Championships

CAF Establishes New Infrastructure Department to Enhance Stadium Development Across Africa

Bibiani Gold Stars Set to Begin GPL Title Defence Against Bechem United as Fixtures for 2025/26 Season Are Released

Gov’t Increases Producer Price of Cocoa to GHS 51,660 per Tonne for 2025/2026 Season

Trending

Business

AngloGold Ashanti Doubles Earnings and Free Cash Flow on Higher Gold Prices, Production Surge in Q2 2025

August 4, 2025

AngloGold Ashanti Doubles Earnings and Free Cash Flow on Higher Gold Prices, Production Surge in Q2 2025...

Africa’s Richest Country to Boost Continental Trade Ties After U.S. 30% Tariff Hit

August 4, 2025

Nigeria Hits Panic Button as West Africa Logs $2.1bn in Suspicious Crypto Transactions

August 4, 2025

CID Recovers 43 Stolen Luxury Vehicles Smuggled into Ghana

August 4, 2025

2025 Mid-Year Economic Review: Fiscal Discipline is a Necessary Pain

August 4, 2025

Who we are?

NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World

NorvanReports is a unique data, business, and financial portal aimed at providing accurate, impartial reporting of business news on Ghana, Africa, and around the world from a truly independent reporting and analysis point of view.

© 2020 Norvanreports – credible news platform.
L: Hse #4 3rd Okle Link, Baatsonaa – Accra-Ghana T:+233-(0)26 451 1013 E: news@norvanreports.com info@norvanreports.com
All rights reserved we display professionalism at all stages of publications

No Result
View All Result
  • Home
  • Business
    • Agribusiness
    • Aviation
    • Energy
    • Insurance
    • Manufacturing
    • Real Estate
    • Maritime
    • Tourism
    • Transport
    • Banking & Finance
    • Trade
    • Markets
  • Economy
  • Reports
  • Technology
    • Cryptocurrency
    • Cyber-security
    • Social Media
    • Tech-guide
    • Telecom
  • Features
    • Interviews
    • Opinions
  • Lifestyle
    • Entertainment
    • Sports
    • Travel
    • Environment
    • Weather
  • NRTV
    • Audio
    • Video

Welcome Back!

Login to your account below

Forgotten Password?

Create New Account!

Fill the forms bellow to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
NORVANREPORTS.COM | Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.