The risk-averse stand in the market is turning from expectation to hopeless as discomfort about when the framework for the newly introduced foreign exchange (FX) flexibility policy will be implemented.
The Central Bank of Nigeria Governor, CBN, Godwin Emefiele announced last May following the Monetary Policy Committee meeting-MPC-that the apex bank is adopting a flexible foreign exchange rate regime after it came under consistent criticism for it’s exchange control measures. The Bank had pegged the Naira at N197 to the dollar but that became clearly unsustainable as the government income shrank rapidly following oil price collapse.
The naira fell further at the end of last week’s trading by 1.4 percent against the dollar to close at N355/$ relative to previous week’s close of N350/$, underlying the impact of CBN inaction after the proposals
Analysts say they had expected a quick proactive step after the announcement of the flexible regime to stem speculation and uncertainty on the currency.
It is estimated that $0.7 billion was spent defending the currency which is still traded officially at N197.50 to the dollar in the month May 2016 following sudden drop in foreign reserves in the Month. The reserves dropped to $26.4 billion from $27.1 billion during the period.
The Federal government is using a different rate at N285 naira to the dollar for petrol imports. In all, the country currently operates four distinct foreign exchange markets, all of which have combined to keep the pressure and volatility of the markets violent viz the official rate, the interbank rate, the rate at which petrol is imported and the black market rates.
