Amid President Tinubu’s rates unification, CBN allows banks to trade forex freely

UPDATE:

THE Central Bank of Nigeria (CBN) has confirmed the abolishment of the segmentation in the foreign exchange market. 

This was contained in a statement on Wednesday night from the Director, Financial Markets, Angela Sere-Ejembi.

The statement reads  “The Central Bank of Nigeria (CBN) wishes to inform all authorized dealers and the general public of the following immediate changes to operations in the Nigerian Foreign Exchange (FX) Market: Abolishment of segmentation. All segments are now collapsed into the Investors and Exporters (I&E) window. Applications for medicals, school fees, BTA/PTA, and SMES would continue to be processed through deposit money banks.”


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“Re-introduction of the “Willing Buyer, Willing Seller” model at the I&E Window. Operations in this window shall be guided by the extant circular on the establishment of the window, dated 21 April 2017 and referenced FMD/DIR/CIR/GEN/08/007. All eligible transactions are permitted to access foreign exchange at this window.

***

NIGERIA has officially floated its naira currency after years of a regulated foreign exchange market that economic experts believe demotivated investors from doing business.

An official of the Central Bank of Nigeria (CBN), who said he was not authorised to speak to the media, confirmed the foreign exchange development to The ICIR, although there has not been any official statement to this effect.

“A discussion has been held to that effect, although there has not been any official statement to that effect,” the official said.

To further affirm this development, a market rate based on a willing buyer and a willing seller is currently being quoted by banks who sent out emails to some customers this morning.

The suspended Central Bank of Nigeria’s (CBN) Governor, Godwin Emefiele, had prioritised a multiple rates regime and capital controls, which analysts say bred uncertainty among investors in the Nigerian business and economic space.

Multiple global lending agencies like the World Bank and the International Monetary Fund had kicked against the multiple exchange rate regime.

Both global lending agencies persistently called for the unification of exchange rates, saying this would give a direction to Africa’s largest economy.

In many instances, foreign airlines and international oil companies struggled to repatriate their funds as the CBN enforced capital controls that did not allow for easy repatriation.

Economic watchers and some bankers say the exchange rate could go as high as between N800 and N1,000 by the end of today, and advised the CBN to prioritise supply of dollars to support the naira float.

“The policy announcements are good. We should also wait for other reforms to complement this. Markets are already applauding the move, but more needed to be done on capital control reforms so that investors will know how to bring in, and how to take their funds,” a research analyst with Arise Television,” Bode Ososami, said.

Ososami further pointed out the need for an economic team by the President Bola Tinubu administration that would work at preventing policy flip-flops and have a clear path for investors.

“The convergence of the rates is only the first step. The next step is the most crucial, and that is to boost supply into the market and ensure proper management of capital controls to grow investors’ confidence.

“No foreign investor will come without a hedge, and that can only come when there is assurance of supply. That’s the hard work,” he said.

Another expert and chief executive of Cowry Assets Plc, Johnson Chukwu, is of the view that the willing buyer/willing seller arrangement that has now been adopted is only the first of six steps to fixing Nigeria’s broken foreign exchange market.

“The focus is to grow supply and be strategic in implementing these reforms,” Chukwu said.






     

     

    Expectations have become high after the announcement on fixing Nigeria’s broken foreign exchange market, analysts insist.

    A fund manager at Stanbic IBTC Pension Managers Ltd, Chidi Uzo, described the move as “a bold step in the right direction.”

    Uzo said, “However, this should go in tandem with the lifting of capital restrictions for investors waiting on the sidelines to repatriate their funds. We expect foreign investor participation to be swayed by the extent to which capital is allowed to flow freely.

    “Overall, the effective harmonisation of Nigeria’s multiple exchange rates by allowing market forces to determine the fair value of the naira should immediately reverse the multi-year widening spreads between the official exchange rate and the parallel market exchange rates.”

    Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

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