A new dawn in Nigeria’s exchange rate policy will be ushered in on Monday June 20th by the Central Bank of Nigeria. The new policy is such that the exchange rate will be determined by the forces of demand and supply.

We have covered this subject intensely at Nairametrics by featuring quality articles that help our readers understand better. However, we decided to dedicate a page to frequently asked questions that we know small businesses and individuals may wish to have answers for. The page will be updated frequently as things become clearer. We will also include new questions and suggested answers to ensure that our readers remain informed.
What do they mean when they say “a currency is floating”?

The term “floating” in exchange rate context refers to the exchange rate of a country that is not fixed but “floats” to the direction of demand and supply. If demand is high and supply is low, the exchange rate floats higher. When demand is low and supply is high, the exchange rate floats lower. When demand and supply are nearly equal we have an exchange rate balance or equilibrium.
A devaluation can also occur in an interbank market when the home currency depreciate significantly against the dollar or any other benchmarked currency. In Nigeria and most developing countries, devaluation is more synonymous contextually with the Central Bank depreciating the currency by fiat. For example, when the CBN moved the exchange rate from N165 to N197 it was a devaluation.

Will we still have two exchange rates? If yes, which one do I rely on for transactions –

Whilst the parallel market rate has never been an official rate, it is still very much referenced as the closest to an ideal market determined rate. The interbank market rate and the parallel market rates will therefore remain for some time. The parallel market rates will most be cash based and will serve the retail end of the market for buyers and sellers of forex who do not wish to transact through banks. However, we expect that the difference between both rates will be slim (perhaps plus or minus 5% max).

Will this new policy eliminate black market operators and do I still need to track parallel market rates?

Parallel markets will still remain, however we believe their influence will be mostly minimal and not like we have them today. As such, tracking that rate is still important provided that is where you still buy and sell dollars. As our forex markets develop, the CBN will introduce structures that will cater for the very retail end of the market. For example, some retail FX operators can deal only in online transactions, others purely cash while some card based transactions.

If I want to renew my Visa on Monday or pay for my import duties, at what rate will I pay?
Reead more on: http://nairametrics.com/frequently-asked-questions-nigerias-new-exchange-rate-policy/

lalasticlala, mynd44, akanniade10 gazzuzz kingreign seun dominique
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Sketchy. Still watching ad the trend unfolds.
Ultimately nice move by govt.

Kudos.