The Central Bank of Nigeria (CBN) is reasonably optimistic the naira would settle at around N250 to the U.S. dollar after an initial period of weakness following a flotation on Monday, the bank’s governor has said in a letter to President Muhammadu Buhari, according to Reuters.
Nigeria’s central bank said on Wednesday it would begin market-driven foreign currency trading next week, abandoning the peg of N197 naira per dollar that it has supported for 16 months.
Foreign investors and economists have called for months for a devaluation as chronic foreign currency shortages choked economic growth and deterred investment.
The naira is expected to fall sharply when interbank trading begins on Monday, but the central bank said it did not have a target for the currency and the price would be purely market-driven. The naira was trading on the black market at around N370 to the dollar on Thursday.
Giving the first indication of a target, Governor Godwin Emefiele said in a June 3 letter to Buhari — seen by Reuters — that the central bank hopes the naira will eventually trade at around N250 per dollar, a level the president has “approved”.