Plans have been finalised by the Central Bank of Nigeria (CBN) to stop the naira’s relentless decline against the dollar. The most important of these strategies is to flood the market with dollars.
The Nation reports a CBN board member, who spoke to our correspondent under anonymity, said: “At this point, the bank is going to inject foreign exchange into the market to stabilise the exchange rate.
“It will be a desirable thing, and that’s the essence of having reserves to stabilise the naira at any point in time.”
The board member noted that previous interventions by the CBN included putting money into the foreign exchange market when required.
He added that the decision is “a management routine function”, adding: “It’s a desirable thing to help the naira at this point.”
The CBN board member argued that to stop the naira from further haemorrhaging, the advisable thing is “as much as possible to flood the market with foreign exchange”.
“I am sure this government did not want any demand management policy, but such policies are also called for at this point.
“If they are operating a free market, the demand is overwhelming and you need to manage that demand, restrict that demand with certain policies.
“Foreign exchange availability is very limited, so the problem requires to be tackled from both the demand and supply sides.”
The naira yesterday closed at N744.41/$ at the Investors & Exporters (I&E) window and N935/$ at the parallel market.
The naira has lost over 40 per cent of its value since June when the Central Bank of Nigeria (CBN) adopted a unified exchange rate structure and collapsed all rates into the I&E window.
Data from the FMDQ Exchange showed that market turnover at the I&E window hovered around $60 million to $80 million throughout last week, which is considered a low liquidity position for the market.
Folashodun Shonubi, the acting governor of the Central Bank of Nigeria (CBN), said yesterday that a number of steps will be taken to stabilise the naira.
He claimed that those actions have the approval of President Bola Ahmed Tinubu.
But when he spoke with reporters at Aso Villa after his meeting with the President, he chose not to make them public.
Shonubi credited the depraved actions of currency speculators for the naira’s demise.
He predicted that they will soon be subject to the hammers of the government.
Shonubi said: “Mr President is very concerned about some of the goings on in the foreign exchange market.
“One of the things we discussed is what could be done to stabilise the naira and what could be done to improve the liquidity in the market, as well as the goings on in the various other markets, including the parallel market.
“He’s concerned about its impact on the average person, since, unfortunately, a lot of activities that we do, which are purely local, are still referenced to exchange rates in the parallel market.
“We’ve discussed and I’ve shared with him what we’re doing to improve supply.
“If you look at the official market, you’ll find that that market has been fairly stable and the spreads of the difference have not fluctuated as much.
“We do not believe that the changes going on in the parallel market are driven by pure economic demand and supply, but are topped by speculative demand from people.
“Some of the plans and strategies, which I’m not at liberty to share with you, means sooner rather than later, the speculators should be careful because we believe the things we’re doing, when they come to fruition, may result in significant losses to them.
“But my presence here is more about the concerns of the President and we are doing something about them, assurances of which I have given him.
“So I hope this helps. We are looking at it and we’re doing things that will significantly impact the market in a few days and we will all see it.”
