- Policy shows bank is shifting to flexible exchange rate management
Nigeria is now gradually and tenderly tilting its exchange rate management to a flexible rate regime from a managed float just in consonance with the allusion by Nigeria’s Finance Minister, who on Monday said the nation is adopting a new flexible rate policy for its official transactions as has been applied in the investors and exporters windows.
Godwin Emefiele, the CBN governor, who on Tuesday at the MPC briefing in Abuja debunked the rumour of the adoption of flexible rates as was stated by Zainab Ahmad earlier, has in a statement announced that the apex bank will make available direct additional funding to banks to meet the needs of Nigerians for Personal and Business Travel, Medical needs, and School fees, effective immediately. The aim according to the governor is in continued efforts to increase the availability of Foreign Exchange in order to ease the difficulties encountered by Nigerians in obtaining funds for Foreign Exchange transactions.
The bank in a statement signed by Isaac Okoroafor, acting Director, Corporate Communications at the CBN stated on Tuesday that it expects such retail transactions to be settled at a rate not more than 20 per cent above the interbank market rate. The statement revealed that the apex bank in order to increase efficiency and maintain confidence in the market will:
“Begin implementing its articulated program to clear all the unfilled orders in the interbank FX market; no longer impose allocation/utilization rules on commercial banks given the mandate to meet all unfilled orders while FX to the manufacturing sector remains a priority of the bank; Implement an effective intervention programme to support the inter-bank market to ensure adequate liquidity necessary to deliver an efficient FX market; and will advise the FMDQ to activate its FX Order-Book systems as soon as possible and also accelerate the on-boarding of FX clients on the FX Relationship Systems to ensure total transparency of the FX market,” the CBN statement said.
Furthermore, the CBN said it will begin the provision of foreign exchange to all commercial banks to meet the needs of both personal travel allowances (PTA) and business travel allowances (BTA) for onward sale to customers. Also, the supply of FX to retail end-users (PTA, BTA, School fees, medical bills, etc) would be sustained by the CBN as such payments must be made by commercial banks directly to the institution specified by the customer. It further revealed that the tenor of its forward sales have been reduced significantly to no more than 60 days circle from the current 180 days circle while all banks have been directed by the apex bank to open FX retail outlets at major airports as soon logistics permits. This is part of efforts to ease the burden of users at airports and also ensure more competitive exchange rates settlement.
Meanwhile, in the foreign exchange market, most market participants have maintained their bids between N401 and N412 per dollar; though, the bank governor has said that it is also working with the government and the finance ministry to achieve a stable foreign-exchange regime.
However, the statement from the Abuja-based regulator revealed that it is to ensure the preservation of our external reserves, stability of our financial system, and growth of our economy to the benefit of all Nigerians.