CBN forex management questioned as naira plunges further

THE Central Bank of Nigeria’s (CBN) approach to foreign exchange management has been questioned as the naira continues on a downward trajectory.

The downward trajectory of the naira has been a recurring incidence since the enforcement of the single exchange rate window introduced by President Bola Tinubu’s administration.

Tinubu has made the unification of exchange rates a key policy of his administration in currency management.

Conversely, the unification has failed to solve Nigeria’s currency problems, as economy watchers want the Central Bank of Nigeria (CBN) apex bank to be clear in its policy directive and address structural defects in the policy.

“Lots of issues need to be addressed and there are structural defects with the way the market is structured. There is also a shortage of supply and the poor signals from the market fuel speculation,” said the chief executive officer of Financial Derivative, Bismarck Rewane, in reaction to CBN’s foreign exchange management.

According to Rewane, the naira has continued to plunge as a result of the unclear policy direction by the CBN, most especially, with the management floating the naira.

“The value of the naira to the dollar at the parallel market is about N1,300. It was trading about N1,216 about a week ago,” he queried.

Rewane noted, that the foreign exchange market doesn’t like uncertainties and confusion, adding that it dampens investors’ confidence.

According to him, excess liquidity is a stoking factor for rising inflation, currently at 28.92 per and a trigger for currency weakness.

The ICIR reports that the monetary policy committee meeting of the CBN, an independent body that looks at Nigeria’s monetary issues last met in July 2023.

“We are now almost going into February, and we don’t even know when the board is to be constituted, said Rewane.

He added that there was evidence that when the monetary policy committee of any country’s  Central Bank is independent, the economy performs better and is not subservient to political interference.

Data from the Financial Market Infrastructure showed that the exchange rate for the Nigerian autonomous foreign exchange market  (NAFEM) rose to N931.23 per dollar on Wednesday, January 17, from N878.57 per dollar on Tuesday, indicating N52.66 depreciation for the naira.

Consequently, the gap between the official and parallel market exchange rates widened to N418.77 per dollar on Wednesday from N416.43 on Tuesday.

The naira, on Wednesday, fell to N1,350 per dollar in the parallel market from N1,295 per dollar on Tuesday.

    The ICIR reported the position of the President of the Association of Bureaux de Change Operators of Nigeria (ABCON), Aminu Gwadabe, who suggested to the apex bank to sustain US dollar inflow to the economy through increased supply.

    He suggested that the dollar supply inflow to the economy would ward off speculators and stabilise the exchange rate market.

    The chief executive officer of Cowry Assets Management PLC, Johnson Chukwu, told The ICIR that the CBN must ‘urgently’ improve the supply of dollars into the economy to lessen demand pressure.

    “If you look at the gap between the official rate and the parallel market rate, you would see that the Central Bank needs to improve supply to ward off speculators,” he noted.

    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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