Setting the stage for a devaluation of the naira, the Central Bank of Nigeria has finally released some details concerning the flexible exchange rate regime its Monetary Policy Committee promised at its last meeting in May.
Addressing journalists earlier today in Abuja, Godwin Emefiele, Governor of the apex bank, said the apex bank would allow the naira exchange rate to be market-driven.
He also said that the CBN had appointed primary dealers for the first time which is expected to help boost FX liquidity in the market when the new system comes into effect on June 20th, adding that the 41 items banned last year for access to forex for imports remained banned
There will only be one exchange rate and the bank will intervene in the market “as the need arises,” Governor Godwin Emefiele told reporters in Abuja, the capital, Wednesday. “We’re talking about an open, transparent two-way system,” Emefiele said. “It’s intended we don’t have speculators and rent-seekers. I don’t expect that any other exchange rate will be recognized.”
The CBN also introduced a two way quote which basically means that the market will act like the stock market where buyers and sellers will state price and quantity they are willing to sell.
The CBN Governor also confirmed that all the “pent up” demand awaiting to be filled (for example airlines looking to repatriate their dollars) will be met at the interbank market but advised caution for buyers looking to rush demand. In what was quite remarkable he clearly stated that the CBN has enough reserves to meet demand and is willing to put its reserves on the line.
The market will also include financial products such as futures where businesses who need dollars in the near distant future can now hedge buy buying at a price today but get the dollars delivered when they actually need it.
As per the new price of the Naira, the CBN Governor mentioned that the price will be known when the market opens officially on Monday