CBN devaluing naira, to grant banks 20% cut on interbank rate

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By Odunewu Segun
 
The Central Bank of Nigeria may be on the verge of fully floating the naira going by the latest forex policy, National Daily has gathered.
 
With this policy, it expects retail transactions to be settled at a rate not exceeding per cent above the interbank market rate. By allowing banks to sell forex at a 20 per cent premium to the current interbank rate, the CBN may be effectively devaluing the naira.
 
According to National Daily investigation, going by the new policy, with the CBN rate at N305, this implies technically that banks will sell Forex at a rate of N366/$1, which technically means that the naira has been devalue by 20 per cent.
 
The CBN has been hesitant to float the exchange rate in part too scared to upset the President, who hates to hear the word devaluation. The CBN, like other government agencies is also fixated with a control and hold policy that ensures market forces continued to be avoided from determining the price of goods and services deemed ‘sensitive’ by the government.
 
Unfortunately, it appears that the Forex situation is one that they can no longer contain. A free float of the naira is nearly inevitable and it is only a matter of time before it materializes. The latest Policy pronouncement by the CBN left some clues required to allow us jump into this conclusion.
The naira on Monday 20th, tumbled to N520 against the United States dollar at the parallel as scarcity of the greenback continued to keep the exchange rate in a free fall mode.
The naira tumbled to 520 against the United States dollar at the parallel market on Monday as scarcity of the greenback continued to keep the exchange rate in a free fall
mode.
The naira had closed at 516/dollar on Friday, after hitting 510/dollar and 507/dollar last Thursday and Tuesday, respectively.
The CBN is planning to sell $1m weekly to each of the country’s 21 commercial banks at a rate of N375 to clear a backlog of demand for retail users and try to narrow the premium between the official and black market rates.
Experts are divided over the outlook for the naira this year. Some experts have said the naira may hit between 520/dollar and 1000/dollar at the parallel market this year unless the CBN reviews its forex policy.

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