By Blaise Udunze
Pending any last minute changes, the Central Bank of Nigeria (CBN) will today unveil details of the much-anticipated flexible foreign exchange policy.
Daily Sun learnt authoritatively that an announcement by the CBN Governor, Godwin Emefiele, will be made today in Abuja following the conclusion consultations with various stakeholders on the policy.
It was revealed that the CBN, as part of the new policy, will allow market forces determine the exchange rate of the naira and other currencies but may retain a small intervention window to allow it moderate in some instances considered “critical” to the nation’s economic growth and will apply foreign exchange at an adjustable rate between N230 and N250 depending on the rate at the parallel market.
“The naira will be officially devalued tomorrow (today) and going forward, the exchange rate will be market-driven as done anywhere else in the world,” the source with knowledge of the policy said.
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 stabilise the forex market, calm nervous foreign investors and ease the flow of foreign exchange in and out of the country.
The CBN may introduce a dual exchange rate system and weaken the naira when it unveils a new policy this week, it has been learnt.
Meanwhile, another source, privy to a meeting held between the CBN Governor, Emefiele, and top bankers, said the regulator would probably make an announcement in a circular to banks.
Analysts, including those at Renaissance Capital Limited, said they expect the CBN to allow the naira to weaken around a trading band in the interbank market, while allocating dollars at a fixed rate to industries the government deems strategic.
According to the source, the CBN is still working out details of the system and may reinstate a minimum holding period for foreign investors buying naira bonds.
Emefiele has faced pressure for more than a year to devalue the currency, as other oil exporters from Russia to Kazakhstan and Angola have done, amid a rout in crude prices since mid-2014 to around $50 a barrel.
Investment into Nigeria has shrivelled as foreigners are put off by capital controls needed to defend the peg, while local businesses have struggled to import raw materials and equipment.
The Acting Director, Corporate Communications (CBN), Isaac Okoroafor, did not answer calls to his mobile telephone or reply to a text message requesting comment.
But an economist, the Chief Executive Officer, Cowry Asset Management Limited, Johnson Chukwu, said a dual exchange-rate policy could be prone to abuse, saying the country had practised such in the past without much success.
He believes that a largely market-determined single exchange rate system is the best for the country.
“Dual exchange-rate system is a way forward but it is not the end. We had practised it before but we had to abandon it. I believe sooner or later we will abandon it if we eventually adopt it,” he said.