The Central Bank of Nigeria (CBN) has announced its new forex policy which is set to kick off from June 20; the new regime which is market-driven is aimed at boosting the supply of foreign currency in the country. This model will also see the current official pegging of the dollar at N199 removed.
The announcement was made on Wednesday by the CBN governor, Godwin Emefiele. The new forex policy would take effect as from June 20.
“We now believe that the time is right to restore the automatic adjustment mechanisms of foreign exchange rate with the reintroduction of the flexible interbank exchange rate market. The market shall operate as a single market structure through the interbank and autonomous window.”
He noted that foreign exchange market would be opened to ease demand on spot trading, reduce volatility and give businesses more certainty. He said the interbank trading window would aid economic growth and help restore investor confidence.
The CBN Governor explained that the actual guidelines will be made public later on Wednesday, adding that the regime would have between eight and ten primary traders handling “minimum volumes of $10 million.”
State House insiders are of the view that the President is keen on weaning Nigeria’s economy off its dependency on oil and sees freeing the foreign exchange shackles as the next logical step. The CBN has pegged the naira at 199 to the US dollar since March last year but has come under pressure to devalue the currency further. Black market rates have seen the naira slump to as low as 365 to the dollar this week.
Emefiele, however, said the government would prevent the forex market from being controlled by speculators, harping on the need for dealers to professional in their dealings.
“The CBN will not allow the system to be undermined by speculators and rent-seekers, any attempt to breach any aspect of this new framework will be heavily sanctioned by the CBN and this may indeed result in the suspension or withdrawal of the FX dealing license of an offending Authorized dealer.”
Let’s see how that goes.