The Central Bank of Nigeria (CBN) says it is intervening in the foreign exchange market, adding that the volatility in the market will soon be moderate.
“We have started intervening and we’ve been doing it for a while and we will continue to intervene to bring the markets to the levels that we believe it should be.
“Right now and in the short run, these volatile times are expected but we expect them to moderate sooner rather than later,” acting CBN Governor, Folashodun Shonubi, said on Tuesday after the bank’s Monetary Policy Committee (MPC) meeting in Abuja.
He also said MPC raised Monetary Policy Rate (MPR), which measures interest rate, from 18.5 percent to 18.75%.
During his inauguration on May 29, 2023, President Bola Tinubu said, “Monetary policy needs a thorough housecleaning. The Central Bank must work towards a unified exchange rate. This will direct funds away from arbitrage into meaningful investment in the plant, equipment, and jobs that power the real economy.”
On June 14, 2023, the CBN abolished the segmentation of the forex market into different windows and told Deposit Money Banks to freely float the naira against the dollar and other international currencies.
Buyers and sellers of foreign currency in the official FX market were since allowed to quote their preferred rates, as against previous practice where CBN dictated rates.
Addressing reporters on Tuesday, the acting CBN chief said, “We are not trying to unify any rate. We believe that we need to encourage the markets to be more efficient and to be more effective and that takes a bit of time.
“Some of the volatility you’ve seen over the period has been driven by that same fact that the market needs to find its level and also the reality that there’s pent-up demand which current supply may not be sufficient for and as we ease and satisfy the pent-up demand, we begin to see a more efficient market that runs.
“We also need to understand the dynamics of pricing in the market. We feel we should actually stop calling it the Investors and Exporters (I&E) widow because it is now much more than the I&E.
“It’s a market where everybody and anybody through the licensed institutions can participate. So, we expect that over time, sooner rather than later the volatility you are seeing would normalise.”
He said the role of the CBN is to intervene and keep the market at a fairly stable level.
“We have our views as to what that level is and as the market continues to oscillate around that level, if there’s a need for us to intervene either by buying or selling. That’s the role of the central bank.”