The Central Bank of Nigeria’s decision to float the naira in response to dollar demand and supply, in such austere times as this, will probably be ultimately remembered as another policy shift that breached the gates and unleashed devastating floods that swept away any flickering hope of economic diversification or credible inclusive growth. The serial devaluation dictated by the 1986 Structural Adjustment Programme was another such event that disenabled our economy, traumatised our people and challenged our traditional value system in many ways.
The official floating of the Naira opened at the Interbank on Monday, 20th of June after decades of a Naira peg by successive Nigerian Governments and Central Bank Governors.
The CBN Governor, Godwin Emefiele had last Wednesday announced to the world that Nigeria would be introducing a new exchange rate policy that will see the price of the dollar dictated by market forces rather than a fixed exchange rate.
We have been monitoring activities all day and after several speculations can now reveal a summary of what transpired at the market.
Rating Agency Fitch has waded in on the new Flexible Exchange Rate Policy issued by the Central Bank of Nigeria (CBN) on Wednesday June 15, 2016.
Fitch says Nigeria’s planned shift to a more flexible foreign-exchange regime could aid the sovereign’s adjustment to lower oil prices and support growth, although implementation may present challenges. We highlighted key points in the article which you will notice in the course of your reading.
The new foreign exchange regime adopted by the Central Bank of Nigeria (CBN) will unshackle consumer goods firms that have hitherto been in bondage as restrictions prevented them from accessing dollars to import raw materials and pay suppliers.
Godwin Emefiele, the governor of the apex bank, last week reopened the interbank foreign exchange market and have the naira, completely determined by the market forces.
The Naira had been held at the N197-N199 since mid 2015, a policy that caused capital flight as investors fret that the currency may be overvalued and an abrupt devaluation could culminate in loss of significant investment.
But with the new Forex regime kickstarting today, and with its attendant of liquidity flow in the system, consumer goods firms that had been pained by the old policy will have the leeway to embark on the desired expansion drive as access to dollar will enable them buy plants and machineries for the purpose of bolstering production.
Good afternoon ladies and gentlemen and welcome to the Central Bank of Nigeria (CBN). The Management of the Bank has called this Press Conference in response to one of the commitments contained in the Communiqué of the Monetary Policy Committee (MPC) of 24th May 2016.
Having consulted widely and prepared carefully, the committee of Governors of the CBN is delighted to unveil to relevant stakeholders and the general public, the broad framework and guidelines of the Flexible Exchange Rate Inter-bank Market, which we alluded to at the end of that MPC Meeting. Before I proceed into the details of this new policy, please permit me to provide you with a brief context.
Attacks on pipelines in Nigeria’s oil-rich Niger River delta region have slashed crude output to the lowest level in 27 years and shut all but four of the country’s 23 gas-powered generators, leaving much of the West African nation without electricity. A group calling itself the Niger Delta Avengers has claimed responsibility. Here’s what the conflict is about:
As the Central Bank of Nigeria (CBN) continues with its demand management policy in foreign exchange (forex) allocation to financial institutions, the returns on foreign exchange utilisation have shown that it sold a total of $2,177,999,996 to commercial and merchant banks as well as the Bank of Industry (BoI) between March 1st and May 31st 2016.
A breakdown of the weekly returns on forex utilisation compiled by THISDAY showed that while in March 2016, the banking sector regulator sold a total of $921,352,549 to banks, and $669,405,241 in April, the financial institutions were allocated a total of $587,242,206 in May. The report however showed a gradual decline in the monthly forex sale by the central bank.
Policy flip-flops by the government, dwindling poor corporate results by quoted companies and general downturn in the economy have led to a fall of N2 trillion in the value of the Nigerian equities market within the last one year, THISDAY checks have revealed.
The value of the equities market stood at N11.512 trillion on June 3, 2015 but has dipped to N9.491 trillion as at June 3, 2016 as investors dumped shares on the back of policy inconsistency on the part of government, dwindling oil revenue and general challenging operating environment.
Although the equities market has suffered decline for the past two years, it was expected that the entry of a new administration would reverse the negative trend.
Naira rose to N361 to the dollar on Tuesday in the parallel market compared to the N357 price achieved on Monday. The naira has been depreciating in recent weeks as the CBN continues to leave Nigerians in the dark about what its planned forex policy will look like.
Nigeria’s Minister for Finance Kemi Adeosun was in London on Tuesday to pitch Nigeria’s plan to borrow money from foreign bond investors. We had opined here that she could use this medium to reveal what was in the offing as per the new “flexible exchange rate” policy.
As expected she spoke to investors and provided an update on the policy. According to Bloomberg, two analysts who were present at the meeting revealed that “Nigerian officials said they are still working out the details of a new currency policy and may make an announcement within the next month”.
To be more specific about how long this could take, one of the investors Kevin Daly, a money manager at Aberdeen Asset Management Plc, informed Bloomberg that it could be ”days or weeks,” . He also revealed that Nigerian authorities said they’re ”having discussions, including with local banks,” Daly said by phone from London.