Nigeria’s commercial banks will set the first exchange rate of the naira versus the dollar when the currency is allowed to float freely on Monday after the Central Bank abandoned its dollar peg, a senior banking source said on Friday.
On Wednesday, the Central Bank said it would float the national currency on Monday, but it has given few details on how the new rules will be implemented.
In their first detailed guidance, Central Bank officials told bank chief executives at a meeting on Friday that lenders would set the first naira rate to the dollar based on demand without intervention from the central bank, one senior banking official told Reuters.
A Central Bank source said that Governor Godwin Emefiele was at the meeting and confirmed that commercial banks will determine the market rate on Monday.
The Central Bank officials also told the bankers it did not commit itself to clearing up a backlog of hard currency estimated at around $4 billion but will intervene if needed, the banking official said.
He also said the Central Bank would open up licenses for primary market dealers beyond the initial target of eight to 10 participants that it had announced on Wednesday.
Bid-offer spreads for trading would be set at one naira, and banks are required to publish their buy and sell rates on a daily basis, the banking source said.
The central bank will the evaluate performance of the new regime by December, he added.
Primary dealers can handle volumes of $5 million between themselves as the standard order size and can trade up to $1 million with any other dealer, the source said.
The Central Bank could not be immediately reached for comment.