Naira Drops As CBN Announces New FX Policy

Naira, Central Bank of Nigeria, CBN, Nigerians,The Central Bank of Nigeria (CBN) on Monday announced its first policy actions in the Foreign Exchange (FX) market.

The announcement by the financial regulator comes less than a week after the National Economic Council asked the CBN to revisit its policies on the FX market, as the value of the local currency unit (Naira) dips almost on a daily basis.

The apex bank also announced direct additional funding of foreign exchange to banks for onward sales to Nigerians for their personal, basic travel, medical needs and school fees.

The bank stated in statement that the new directive takes immediate effect.

The apex bank, however, stipulated that such retail transactions should be settled as a rate not exceeding 20% above the interbank market rate, which finished on Monday at 305 Naira, 25 Kobo to the U.S. dollar.

In addition to this, the central bank also announced a significant reduction in the tenor of its forward FX sales from the current maximum cycle of 180 days, to not more than 60 days from the date of transaction.

This move, the financial regulator said would further increase the availability of foreign exchange to all end users.

As the bank seeks to increase efficiency of the FX market that has come under intense local and international criticisms, the apex bank said immediate steps were being taken to clear all unfilled orders at the interbank market, remove imposition of allocation/utilisation rules on commercial banks, as well as implement an effective programme to support the interbank market.

The operator of the interbank FX market, the FMDQ OTC Securities Exchange, was therefore advised to activate its FX order-book systems as soon as possible.

The agency was also asked to fast-track the on-boarding of foreign exchange clients on the FX relationship systems, in order to ensure total transparency of the foreign exchange market.

CBN Resolves To Clear All Backlog of Forex Demand In The Country

forex, CBNThe Central Bank of Nigeria has resolved to clear all the backlog of forex demand of about 5 billion dollars in the country through spot and forward settlements.

According to a statement released by the Acting Director, Corporate Communications of the Central Bank, Mr Issac Okoroafor, the move is to engender confidence, ensure credible price formation and sustain the integrity of the Nigerian inter-bank FX market.

This comes as the new flexible forex trading begins on Monday.

The Central Bank of Nigeria (CBN) had released the highlights of the much awaited flexible foreign exchange market policy on Wednesday, June 15, weeks after the Monetary Policy Committee announced the introduction of the policy.

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.

FX Market: Naira May Trade At N350 To Dollar

Naira, Market, dollarThe Nigerian currency is expected to trade around 350 Naira to the dollar in the coming days as uncertainty over the implementation of the Central Bank of Nigeria’s planned new flexible exchange rate policy persists.

A meeting between the CBN Governor and local currency traders over the policy has failed to yield desired results.

Dealers say the financial market dealers association initiated the meeting with Mr Godwin Emefiele to discuss the policy which seeks to abandon the naira’s 15-month peg to the dollar.

The CBN says it would issue the guidelines for the flexible exchange rate policy at the appropriate time.

The local currency retreated to 350 to the dollar on the parallel market on Thursday from 360 Naira to the dollar last week.