Naira instability: Market leaders demand rate unification


Stakeholders in the Nigerian financial sector have called for exchange rate unification to protect the Naira from further depreciation.

The market leaders made the call in a live webinar organised by AZA, a cross-border payments platforms and forex trading firm,  on the theme: United States of Naira: What Price for Unification?

Speaking first, former Governor of the Central Bank of Nigeria and deposed Emir of Kano, Muhammed Sanusi 11, said the huge gap between NAFEX and BDC is a reflection of shortage of foreign exchange, advising the monetary policy makers to fund Bureau De Change (BDC) segment of the foreign exchange to protect the Naira.

According to him, there have been huge gaps between the official rate, the Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX) and the BDC rates since 2016.

The former CBN boss said the apex bank is already moving towards a unified exchange rate regime.

“It is what the IMF and the World Bank have asked for. It makes for positive transparency; it makes for clarity of direction; it also reduces the speculative demand for naira. For me, this is the Central Bank finally saying, basically, we will do what the market has been asking for,” he added.

He said there are about $4 billion portfolio investors’ cash on the list of the CBN for repatriation, but suggested that if the portfolio investors want to take their money out at any price, they could take a huge devaluation and take a hit.

“But, if they want to preserve the value of their currency, there is some virtue in waiting for an orderly unwinding of these backlogs because we must remember that when Covid-19 hit and after the Russia-Saudi fiasco, oil prices went down to $10 a barrel.

Also speaking, an analyst with West Africa Banks,  Nkemdilim Nwadialor, said Nigeria seemed to be facing a liquidity gap in the forex market and that has undeniably contributed to how far all the markets are shrinking.

She said: “I believe that unification is long overdue; it is much needed. It is a no brainer at this point. But what I would like to point out is that CBN has not yet released any framework or overview around how it plans to unify.

“We still do not have a concrete basis for understanding what is happening to bring about unification. There is a lot of talk and there is a lot of possibility that unification will come through. However, in terms of actionable steps, plans or policy layout, we have not seen that from the CBN and so we can not speak very confidently on where we think post-unification rates should be.”

According to the CEO of Renaissance Capital Nigeria, Temi Popoola, Nigeria is going into a regime where there is unification around particular rates but there is no liquidity.

He said: “The reality is that multiple rates do have their place in monetary policy management. They are useful when you have massive shocks to smooth out volatility, and to help the broader economy.