CBN Adjusts Exchange Rate, Pegs Naira At N390 To A Dollar

The Central Bank may have devalued the exchange rate between the dollar and the naira as it sold the currency to the Bureau De Change Operators at N390 to a dollar.

This is about N4 higher than the N386 per dollar which the apex bank had sold dollars to the BDC operators

The development followed the depreciation of the exchange rate to N390 to the dollar at the Financial Market Dealers Exchange Over The Counter NAFEX market.

The FMDQ NAFEX is an official market where the exchange rate is traded.

The apex bank has also directed all licensed Bureau De Change operators to sell dollars to end-users at not more than N390 to a dollar.

The naira was traded at N390 to a dollar on Thursday and the rates remain almost the same on Friday trading for N390.25 to the dollar.

A recent circular had suggested that the CBN has devalued the exchange rate between the dollar and naira sold to the BDC’s to N390/$1.

The circular also mandated the BDCs to sell to potential buyers at N392/$1. The volume of sales for each market is $10,000 per BDC.

It said, “Please be advised that the applicable exchange rate for the disbursement of proceeds of IMTOs, for the period Monday, November 30th to Friday, December 14, 2020, is as follows: IMTSOs to banks – N388/1USD; Banks to CBN –  N399/1USD; CBN to BDCs – N390/1USD; BDCs to end-users not more than N392/1USD.”

The circular signed by Dr. O.S. Nnaji, Director of Trade and Exchange at the CBN, and dated November 30th, 2020 put the volumes of sale for each market at $10,000.00 per BDC

The WHISTLER had exclusively reported that between February 20, 2014 when Mr Godwin Emefiele assumed duty as the Governor of the Central Bank of Nigeria and November 25, 2020, the nation’s currency had lost a whopping 140.96 per cent of its value against the United States dollar.

Some finance and economic experts had told this Website that time has come for the apex bank to stop its intervention in the foreign exchange market as the measure is discouraging local economic activities.

The experts who spoke in separate telephone interview with THE WHISTLER also asked the CBN to allow the forces of demand and supply to determine the true value of the Naira.

A Developmental Economist, Odilim Enwegbara said while the CBN had recorded much success in its real sector intervention funding programme, there is need to support sectors that would attract foreign exchange.

He said, “I want CBN to stop intervening in the forex market because each time it intervenes, it stops the market determinants of the value of the naira.

“The CBN must create a policy that everyone that is into forex either official or black market must declare their sources of forex in their Letters of Credit and Customs.

“When the CBN does that, I can assure you that the value of the naira will be stabilised because those who are actually hoarding the dollar are those causing the hike of the value of the exchange rate.

“The CBN must allow the market to determine the value of the naira but also ensure that anybody who is bringing in forex to Nigeria must declare the source of the forex.

“This will enable the CBN to trace the source of the forex to avoid what we call round-tripping because round-tripping creates a gap and as such, those involved in it would want to take advantage of the gaps created between parallel and official window.

Speaking further, Enwegbara noted that a weak naira policy of the CBN will promote economic diversification and industrialisation.

He explained that by stopping subsidising the naira, the apex bank would help price out imports and encourage inward-looking consumer markets.

He said, “CBN should also invest in businesses that would bring in forex. CBN should invest in products that would generate forex for the country and stop Nigeria from importing those goods that would require forex.

On the argument of the CBN that stopping its intervention would further make the naira lose its value, Enwegbara said such intervention is not sustainable.

He added, “How long will the CBN continue to intervene in the forex market? When the value of the naira depreciates to such extent, there would be inward looking consumption because when what you used to buy for N10,000 becomes N100, 000 and there are alternatives that are available, you will go and buy the alternative.

“And we have to make sacrifices; CBN should allow the naira to have its true value so that we can know the actual value of the economy so that those consuming imported goods will stop consuming them.

“Those who are going on vacation and medical tourism who will now see that it will cost them more will have to stay back and do their vacation and treatment here.

“When you encourage the local currency by intervening, then you are discouraging local economic activities that will eventually lower the value of that currency in forex.”

ENDS