After years using government determined exchange rate, the Central Bank of Nigeria (CBN) has adopted the NAFEX/I&E Window exchange rate on its website.
The exchange rate on the CBN’s website reads N410.25/$1 referencing it as “NAFEX Exchange, Rate (USD) as at Monday, May 24, 2021.”
Source: CBN website
The apex bank had on 14th May 2021 removed the official exchange rate of N379/$1 from its website, a move seen as step towards the adoption of the NAFEX exchange rate for official transactions.
The official rate of N379/$1 has been retained by the CBN on its website since August 2020, when it last adjusted the exchange rate.
The CBN in 2017 introduced the NAFEX (Nigerian Autonomous Foreign Exchange Rate Fixing Methodology) in response to currency crisis at the time.
According to Nairametrics, a circular published on April 24th, 2017 by FMDQOTC where the exchange rate is determined by the market read in part:
“This Market Notice is issued pursuant to the Central Bank of Nigeria (“CBN”) circular dated April 21, 2017 (Ref:FMD/DIRCIR/GEN/08/007) and titled Establishment of Investors’ & Exporters’ FX Window which provides in clause 4.0 that in order to support appropriate benchmarking and facilitate derivatives activities in the newly established Investors’ & Exporters’ FX Window (the “Window”), FMDQ OTC Securities Exchange (“FMDQ”) will be developing and publishing a new fixing called NAFEX – the Nigerian Autonomous Foreign Exchange Rate Fixing.
NAFEX is the FMDQ reference rate for foreign exchange (“FX”) activities in the Investors’ & Exporters’ FX Window and is designed to represent Spot FX market rates in the Window. NAFEX rates will be generated independently and objectively and published every business day at 12 noon or at a time advised by FMDQ.”
A quote from the FMDQOTC.
“NAFEX is a polled rate based on the submissions of ten (10) contributing banks and calculated using a trimmed arithmetic mean. Upon receipt of quotes, the individual contributing banks’ submission is ranked in descending order. The lowest and highest two (2) quotes are eliminated from the ranked rates leaving only the middle six (6) rates. The arithmetic mean of the remaining rates are then calculated to two (2) decimal places and disseminated as the NAFEX Spot Rate.”
Ifunanya Ikueze is an Engineer, Safety Professional, Writer, Investor, Entrepreneur and Educator.