The Governor of the Central Bank, (CBN), Godwin Emefiele, has confirmed that the apex bank is pursuing the unification of the exchange rate around its Nafex rate. The NAFEX rate is the forex window where Investors and Exporters (I&E) transact dollars at the market-determined prices.
But worried by the growing disparity between the official and black market rates, which is aiding speculation and round-tripping, the CBN had early this year clamped down on some Bureau De Change (BDC) operators for what it described as their accomplices in the falling nation’s currency.
In fact, it was gathered that some of the chief executives of the Bureaus were cooling down at the cells of the Economic and Financial Crimes Commission (EFCC) in Lagos, but had to be released at the outbreak of the Covid-19 pandemic with the attendant restrictions.
Indeed, the operators are yet to resume operations as the apex bank is said to be investigating activities of some of the alleged culprits, adding that, the current move is seen as an antidote to activities of some of the operators.
The development, according to reliable sources could threaten the continued operations of some of operstors.
But, the CBN, would neither confirm nor deny arrest of some officials of the BDC.
In fact, CBN is said to be determined to reduce substantially activities of speculators and alleged accomplices among the ranks of the BDC operators when the exercise is completed.
“We will continue to pursue unification around the NAFEX Market”. The CBN Governor made the confirmation at a virtual Investors’ Conference with other Federal Government representatives in attendance.
Other attendees were Zainab S. Ahmed – Finance Minister,
Patience Oniha – DG DMO
Ben Akabueze – DG Budget Office and a representative of Minister of Health.
Patience Oniha – DG DMO
Ben Akabueze – DG Budget Office and a representative of Minister of Health.
Federal government had said recently that it is considering a unification of the exchange rate and could unify the rate around the NAFEX (I&E) window rate or the official CBN rate of between N360 and N860.5/$1.
Emefiele’s confirmation is seen by some analysts as a renewed and determined cooperation between the Ministry and CBN to ensure that stability and confidence return to the embattled fx market.
At the black market where forex is traded unofficially, the exchange rate hovers around N450 and N456 to a dollar.
Nigeria continues to maintain multiple exchange rates comprising of the CBN official rate, the BDC rates, and the I&E window, among others.
The session was organized to help calm the nerves of foreign investors now awash with bailout dollars but worried about Nigeria’s faltering economy and its likely ability to trigger further devaluation.
In an apparent justification for suspension of activities of BDC operators in this pandemic Period, Emefiele further said that the COVID-19 pandemic has buttressed claims from the bank that most of the pent-up demand was not realistic. He cited the impact of the global lockdown on flights as a clear example. “These airlines are not flying and sometimes you find dollars being sold through the BDC’s into that market just to be seen that we are doing everything possible to moderate the rate,” Emefiele said.
He continues that because “airlines are not flying, and people are not traveling so there should therefore not be any demand for forex exchange in that market”.
The Governor assured that foreign investors dollar demands would be met gradually and in orderly manner insisting that the country met all demands for those who were patient in 2016 when Nigeria was in a similar FX crisis.
However, it is not clear the impact of Emefiele’s remark on the market said to be experiencing pent up demand of up to $5 billion as liquidity shortages continue to affect the NAFEX market.
The Governor assured that foreign investors dollar demands would be met gradually and in orderly manner insisting that the country met all demands for those who were patient in 2016 when Nigeria was in a similar FX crisis.
However, it is not clear the impact of Emefiele’s remark on the market said to be experiencing pent up demand of up to $5 billion as liquidity shortages continue to affect the NAFEX market.
Although the FX turnover at the I&E window continues to experience ocassional boost in liquidity due to CBN interventions, the uncertainty of the market remains, particularly due to liquidity shortages across markets.
Liquidity remains quite tight in the foreign exchange market, with the average turnover in the I&E market significantly down to about $45.5 million in the month of May compared to $297.5 million that was recorded in January.