By Chinwendu Obienyi
The Central Bank of Nigeria (CBN) on Wednesday, clarified that it was not planning to introduce a new Naira policy that would crash the FX dollar exchange rate to N1.25.
This statement comes in response to an online report that suggested the CBN was considering a new FX policy to anchor inflation expectations, facilitate easier conversion to major currencies, reverse currency substitution tendencies, and eliminate higher denomination notes with lower purchasing power.
However, the CBN via its X (formerly called Twitter) handle, said it is false and should be disregarded. It said, “The CBN would like to bring to your attention that this attached message currently circulating on social media is false and should be disregarded”.
The CBN has implemented several policies aimed at reforming the foreign exchange (FX) market, particularly since President Bola Tinubu assumed office at the end of May 2023.
These policies include lifting restrictions on deposits into domiciliary accounts and unifying multiple exchange rate systems, which has led to the devaluation of the Nigerian Naira. As a result of these changes, the price of the dollar in the investors’ and exporters’ (I&E) window of the official market has increased from N461.50/$1 on June 13 to N742.10/$1 as of the time of this report.
Commenting on the FX market reforms in her personal statements at the end of the Monetary Policy Committee (MPC) meeting, a member of the committee and the Deputy Governor, CBN, Aisha Ahmad, stated that the recent foreign exchange market reforms which have resulted in exchange rate convergence, would increase market transparency, and attract more foreign capital inflows.
She stated that although the exchange rate has shown some volatility (depreciated from N435/$1 in May 2023 to N763/$1 as of July 11, 2023 and N780/$1 as of July 20, 2023), stability is expected over the medium term as efforts to ramp up export proceeds intensify, alongside anticipated decline in demand of imported refined petroleum products.
Ahmad said, “Stability of the exchange rate is particularly important due to its strategic role in anchoring investor confidence and passthrough to domestic prices.
Ongoing efforts to boost foreign exchange supply should therefore be strengthened as a more sustainable approach to stabilizing the foreign exchange market”.