N380 Forex Rate Not Devaluation Of Naira, Says Emefiele

A file photo of Central Bank of Nigeria Governor, Godwin Emefiele.
A file photo of Central Bank of Nigeria Governor, Godwin Emefiele.

 

Governor of the Central Bank of Nigeria, Mr Godwin Emefiele on Saturday clarified that the recent jump in foreign exchange rate to N380 to a dollar is not a devaluation but an adjustment.

According to Mr Emefiele, the apex bank has the responsibility to see to the adjustment in the Naira, insisting that the bank has no hand in what happens in the Investors, Exporters and End- users window.

The CBN had issued a circular to all banks and Bureau De Change on Friday, advising that the BDC should not sell the Dollar more than N380/1USD to end-users.

The Central Bank of Nigeria has the responsibility to see to the adjustment in the currency; what you have seen is an adjustment in currency and we have been accused that we have a hand, we don’t have a hand, Emefiele said.

We allow the I&E window, which is the dominant market to dictate the exchange rate in the market.

At this time the CBN provides FX in that market at 380, anyone who has higher than the 380 can go ahead, but it should be available in the market to fund the domestic market.

He added that the new rate is only an adjustment, but in economics and foreign exchange management language, it is not a devaluation, he maintained.

Nigerian Lawmakers Seek Sack Of CBN Governor Emefiele

House, CSOs, BillsSome lawmakers in the House of Representatives say the Governor of the Central Bank of Nigeria, Godwin Emefiele, should be sacked over his management of the country’s foreign exchange.

This is one position put forward as lawmakers considered the lingering scarcity of foreign exchange.

Addressing the House, a lawmaker said that the scarcity had continued to weaken the Naira against the dollar which now exchanges about 400  Naira to a dollar.

“The continuous weakening of the Naira against the dollar and other foreign currencies has affect the cost of goods and services production and has consequently made life more difficult for most Nigerians,” he said.

After deliberations on the issue, the House, however, resolved to have an ad-hoc committee investigate the Central Bank of Nigeria’s forex policies and recommend measures that would stabilise the Nigerian forex market.

The apex bank had on June 20 introduced interbank trading of foreign exchange to make the exchange market more flexible.

Despite the introduction of the policy, there is relative scarcity of forex, prompting the lawmakers to request that the Governor of the bank should be sacked.

The scarcity is propelled by demand for dollar needed by most importers, as the nation largely depends on imported goods.

It is a trend that the Nigerian government said some of its economic policies would address, reducing the preference of foreign products while patronage for made in Nigeria goods is promoted.

Highlights Of The Policy 

The CBN had released the highlights of the flexible foreign exchange market policy weeks after the Monetary Policy Committee announced its introduction.

After its meeting of May 24, the CBN said the policy would allow the bank retain a small portion of foreign exchange for critical transactions.

Key notes released stated that the market would operate as a single market structure via the interbank market and authorised dealers and that it would be purely an exchange rate market managed via Thompson Reuters platform.

Part of the key notes is that the CBN would participate via periodic intervention and would introduce primary dealers that deal with the CBN on a two way quote basis.

The primary dealers are also expected to deal with other players in the interbank market.

Other aspects of the key notes are that there shall be no pre-determined spreads on forex transactions and all forex purchases shall be transferable while 41 items shall remain inadmissible in the forex market for forex transactions.

The CBN will also offer long term forex futures and sales of forex forwards for end users must be trade-backed.

The non-deliverable OTC forex settled trades will help moderate volatility. The OTC settled forex feature shall be on non-standardised amounts, the apex bank said.

Another aspect of the key notes states that proceeds of forex shall be purchased by authorised dealers at the daily interbank rates.

The new police which the CBN said was a market-driven trading system, is expected to end the central bank’s 16 month fixed exchange rate policy.

After the highlights were released, Nigeria’s capital market made remarkable gains, with most stocks appreciating in price.

No Need To Panic

One of the leading global rating agencies, Fitch Ratings had welcomed the decision of the apex bank, saying that the shift to a more flexible foreign-exchange regime could aid Nigeria to adjust to lower oil prices and support growth.

It however, warned that the implementation of the new forex policy may present challenges if not properly managed.

Fitch explained that establishing the new framework’s credibility would be key to its effectiveness in attracting portfolio flows and Foreign Direct Investments (FDIs) to make up for lower oil export receipts.

Meanwhile, the CBN Governor, Godwin Emefiele, has reiterated that there was no need for businesses and investors to panic over the new forex policy, saying it will help address the imbalance in the economy.

FG Warns ‘Saboteurs’ Against Manipulating Foreign Exchange

Abubakar-Malami-Minister-of-JusticeThe Nigerian government has warned ‘certain elements’ within some of the nation’s national institutions whom it said were using their accomplices to manipulate the foreign exchange market.

Reading a riot act to financial regulators on Wednesday, the Attorney General of the Federation and Minister of Justice, Mr Abubakar Malami, said the government was aware of the activities of the elements.

He said the individuals rather than exert their regulatory powers have chosen to manipulate the market to the detriment of the national economy.

“Deliberately Undermined”

Addressing a news conference in Abuja, Mr Malami said these forces, who have failed in their attempts to force devaluation of the Naira, were creating artificial currency situation with the aim of undermining the economic programme of President Muhammadu Buhari.

“The current state of the Naira is not the result of neutral economic factors or directly related to demand and supply forces alone.

“On the contrary, and indeed, on a vary sad note, it is apparent that our national currency is being deliberately undermined through carefully orchestrated criminal conspiracies and manipulation by unscrupulous elements hiding under the clog of the so called market forces,” he stated.

Mr Malami describes the activities of currency manipulators as economic terrorism.

He reiterated the government’s commitment to investigating and prosecuting all indicted persons for economic sabotage.

“As a responsible government we cannot afford to allow such a situation anchored on unlawful alliances and criminal enterprise to continue unchecked when it is apparent that its primary objective is to sabotage the economic agenda of the present administration,” Mr Malami warned.

Recent government policies have resulted in the fall of the Naira in the parallel market, forcing the International Monetary Fund to advise Nigeria to lift the foreign exchange ban and allow a more flexible rate for the Naira.

But President Buhari said hard currency curbs were necessary, as Nigeria could no longer afford to import as much as it did in the past due to the falling oil revenues.