CBN eyes convergence of Naira exchange rates amidst declining value

The Central Bank of Nigeria (CBN) maintains that there would be a convergence of exchange rates despite the depreciation seen in the black market.

At the official Investors and Exporters window, the Naira gained 0.11 percent versus the US dollar, closing at N410.67/$1 compared to N411.13/$1 it closed on Monday.

At the black market the exchange rate remained flat at the parallel market to close at N532/$1. This is the same rate recorded at the close of trade on Monday.

However, data from abokifx showed the Naira lost N4 against the Pound Sterling to sell at N727/£1 compared with N723/£1 of the preceding session and depreciated against the Euro by N1 to close at N626/€1 in contrast to the prior session’s N625/€1.

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Hassan Mahmud – Director, Monetary Policy Department, CBN assured of the exchange rates convergence while speaking as a panelist at a virtual economic event titled; ‘Navigating an Economic Recovery amid a Pandemic’ held recently.

According to him, as CBN focuses more on boosting the dollar supply in the country and investors’ confidence, the exchange rates will take care of themselves with time.

“Contrary to the market perception that the naira remains overvalued, Naira is now strongly determined by market fundamentals.

“We are not really bothered much about valuation. What we are worried about is the supply side and the confidence in the system. The naira is expected to adjust based on demand, that is why the country adopted a managed float regime,” he said.

Mahmud said the apex bank was worried about the supply side of FX and the confidence in the system while adding that the level of the naira is expected to adjust based on demand.

According to him, market failures had made the CBN adopt a managed float regime.