The Central Bank of Nigeria (CBN) has officially allowed the national currency to depreciate, amid falling crude oil prices and pressure on foreign exchange.
The naira can now officially exchange for N168 to a dollar with the moving of the midpoint from N155.
At the end of the Monetary Policy Committee (MPC) meeting on Tuesday, CBN governor, Godwin Emefiele, said the bank had also raised its benchmark interest rate for the first time in three years.
The MRR was raised by 100 basis points to a record 13%. The official peg of the naira was moved to a midpoint of N168 per dollar from N155.
This means the naira will now be allowed to exchange within the band of plus or minus 5% change in rate.
“The current challenge requires bold policy measures, moves on both the demand and supply sides of the foreign exchange market,” Emefiele said in Abuja on Tuesday.
The central bank also increased the cash reserve requirement on private sector deposits by 500 basis points to 20%.
Key decisions of the MPC are:
- Increasing the MPR by 100 basis points from 12 to 13 per cent
- Increasing the CRR on private sector deposits by 500 basis points from 15 per cent to 20 per cent with immediate effect
- Moving the midpoint of the official window of the foreign exchange market from N155/US$ to N168/US$
- Widening the band around the midpoint by 200 basis points from +/-3 per cent to +/-5 per cent.
- Retaining public sector CRR at its current level of 75 per cent
- Maintaining a symmetric corridor of +/- 200 basis points around the MPR
- Retaining Public sector CRR at 75 per cent
- Retaining the foreign exchange trading position at 1 per cent.