Expert raises concerns over CBN’s handling of Naira floating policy

Managing Director of Highcap Securities Limited, David Adonri has raised concerns over CBN’s handling of the Naira floating policy, stating that it has failed to establish a transparent and efficient single foreign exchange market.

Adonri emphasized the necessity of creating a market structure that allows all economic entities to participate in buying and selling foreign exchange through authorized market operators.

He argued that such a structure would effectively allocate hard currencies to various competing needs and produce a single market clearance rate that accurately reflects the true value of the Naira.

Highlighting the current shortcomings, Adonri pointed out that the CBN’s approach involves selective sales of hard currency to banks and Bureau de Change (BDC) operators, which lacks transparency and is susceptible to illicit transactions.

He criticized this strategy as flawed and unsustainable in stabilizing the Naira.

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“The selective sale of hard currency to banks and BDCs by CBN is non-transparent and prone to shady deals. It is a flawed strategy that cannot sustainably stabilize the Naira.

It is inimical to the policy objective of letting market mechanisms allocate scarce economic resources in the economy in order to achieve efficiency,” he said.

Recently, the Central Bank of Nigeria (CBN) issued a circular to Bureau De Change operators (BDCs), informing them of the sale of $10,000 to each BDC at a rate of N1,101/$1.

According to the circular, each BDC is instructed to sell the dollars to eligible customers at a rate not exceeding 1.5% above the purchase price.

This suggests that BDCs are not expected to sell above N1,117/$1. The selling rate is below the N1,251.05/$1 recorded at the end of last week, according to data from the Nigerian Autonomous Foreign Exchange Market (NAFEM).

This is the third attempt by the CBN to sell FOREX to BDCs after a prolonged period of suspension by the central bank in 2021. The ban was lifted earlier in the year following the revocation of licenses of over 4173 BDC operators in February.