By Marcel Okeke
A shocking headline in an online publication: “Naira slumps to N700/dollar as CBN floats currency, stops fixing exchange rates,” stirred my worry and alarm to pen this piece. According to the news story “the Central Bank of Nigeria (CBN) has reportedly directed Deposit Money Banks (DMBs) to remove the rate cap on the naira at the Investor and Exporters’ (I & E) window of the foreign exchange market, to allow for a free float of the national currency against the dollar and other global currencies.” This floating of the national currency is coming barely two weeks after President Bola Ahmed Tinubu’s ‘promise’ in his inaugural address that he was going to unify the nation’s multiple exchange rates.
According to Investopedia, a floating exchange rate is a regime where the currency price of a nation is set by the forex market based on supply and demand relative to other currencies. This is in contrast to a fixed exchange rate, in which the government (that is CBN, in Nigeria) entirely or predominantly determines the rate.
