On Monday, the government said it would use a lower rate of 285 naira per dollar for petrol imports rather than the pegged official rate of 197.
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The authorities have kept the official rate at around 200 naira to the United States dollar, but the black market rate is closer to 450 naira.
“The conditions that led to the contractions in the first quarter of 2016 were still largely unresolved”.
Nigerian news organisation, This Day, has more details on the introduction of the flexible exchange rate regime and the country’s economic situation.
The CBN had on Tuesday said it would adopt a flexible exchange rate policy, a shift from a peg for the naira seen as overvalued, which had hampered investment.
He went ahead to say that “the bank would however, retain a small window for funding critical transactions”.
The flexible exchange rate system is a monetary system that allows the exchange rate to be determined by supply and demand.
On the black market, the naira is trading 40 percent below the official rate as manufacturers and importers pay massive premiums to avoid hefty official currency curbs now blamed for tipping the economy towards recession.
“It is one of the mechanisms used in the foreign exchange market to discourage round tripping”.
According to him, the MPC “came to the conclusion that although the balance of risks remains tilted against growth; previous decisions need time to crystalise”.
Mr Harrison Owoh, a Bureau De Change (BDC) operator said that the policy would impact positively on the economy and remove distortion, hoarding and speculation in the currency market.
But in a surprise move, he kept interest rates on hold at 12.0 percent.
Emefiele said recession was “imminent”, blaming the slump on global oil prices as well as delays in passing this year’s federal budget.
He, however, cautioned that the pass-through effect of prices to other products had to be considered when taking such policy decision. “The committee reaffirmed commitment towards maintenance of price stability and reiterated the need to reappraise the coordination mechanism between monetary and fiscal policy and initiate reforms, for the objective of more efficient policy synchronisation and management”.
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This, he added, would assist in addressing the identified pressure points from the deregulation exercise.
