CBN battles forex market dark forces
…Naira depreciates further in the black market
…As external sector waxes stronger
By Emeka Anaeto, Business Editor
At the backdrop of speculations that some powerful forces are behind the recent controversies over the exchange rate policy and the Naira value, the local currency recorded significant depreciation last week.
The Naira traded largely stable at N414.73/$1, in the official Investors and Exporters (I&E) window, up from N413.83 at the beginning of the week.
But the exchange rate at the parallel market closed at N574/$1, maintaining the wide premium it began since the removal of the Bureau de Change, BDC, involvement in the trading of CBN sourced forex.
This is despite the significant increases in forex supply through the Central Bank of Nigeria’s interventions at both the interbank and the Investors and Exporters window.
The latest depreciation is also coming while all the positive indicators of a stronger Naira came on stream including the successful Eurobond floatation which shored the nation’s external reserves, as well as the steady rising of the oil price in the international market which meant further boost to the nation’s forex earnings.
Many analysts believe that the continue adverse reactions from a section of the forex market despite these positive trends reinforces the notion that some form of speculative attack or outright sabotage is in the mix of the various contending forces in the forex market.
But the mood at the apex bank seems to be calling the bluff of the forces arrayed against its policy of prudential forex market and reserves management in line with global best practices.
The CBN Governor, Godwin Emefiele, had, at the backdrop of the sharp depreciation of the Naira in the parallel market, stated that the only rate he recognises is the I&E window rate, citing that the black market rate is fixed by illegal forex operators.
According to him, “The only exchange rate I can recognise today is the I&E window rate, which is the rate we expect everyone that wishes to procure foreign exchange to use.”
“I don’t recognise that there are any other rates in the market.”
The response of the CBN governor shows that the government would not shift its resolve and lift the ban on the sale of Forex sales to BDC operators anytime soon as many had expected.
The CBN had been selling $20,000 per week to each of the over 5,000 BDCs across the country.
The apex bank, however, said it will henceforth channel weekly allocations of dollar sales to commercial banks to meet legitimate foreign exchange demands, adding that processing of application for new BDC licences has also been suspended.
Launching the war
Earlier in July 2021 Monetary Policy Committee, MPC, meeting which followed the ban on BDC’s participation in the CBN sale of forex, Emefiele had rationalized the ban.
He stated: “It is important for us to note that in line with the CBN Act, we have a mandate other than pricing and monetary stability to…
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