CBN will today announce details of the much anticipated ‘flexible’ foreign exchange rate policy. Acting Director, Corporate Communications Department, CBN, Mr. Issac Okoroafor, confirmed this to Vanguard, yesterday. He said: “Yes, details of the policy will be announced tomorrow (today).”
The announcement is coming three weeks after the Monetary Policy Committee, MPC, of the CBN decided to introduce “greater flexibility in the management of the foreign exchange market. “The foreign exchange market framework, now ready, the MPC voted unanimously to adopt greater flexibility in exchange rate policy to restore the automatic adjustment properties of the exchange rate.
Consequently, all nine members voted to hold and introduce greater flexibility in managing the foreign exchange rate. “The bank would, however, retain a small window for funding critical transactions. Details of operation of the market would be released by the bank at an appropriate time,” the committee said at the end of its meeting on May 24, 2016.
According to agency reports, sources at the CBN said an announcement by Governor Godwin Emefiele will be made in Abuja, having concluded consultations with various stakeholders on the policy. As part of the new policy, the CBN will allow market forces determine the exchange rate between the naira and other currencies but may retain a small intervention window to allow it intervene in some instances ‘critical’ to the nation’s economic growth and will apply foreign exchange at an adjustable rate between N230 and N250, depending on the rate in the market.
Naira to be officially devalued
“The Naira will be officially devalued tomorrow and going forward, the exchange rate will be market-driven as done anywhere else in the world,” a source with knowledge of the policy said on condition of anonymity.
The CBN had set the official rate at between N197 and N199 but the scarcity of foreign exchange due to the crash in the global price of crude oil, which accounts for the bulk of the nation’s foreign exchange inflow, has forced the Naira down at the parallel market (black market) to between N365 and N370, mostly due to speculative trading in anticipation of the implementation of the new policy. Analysts are positive that the new policy would stabilize the forex market, calm nervous foreign investors and ease the flow of foreign exchange in and out of the country.