…Bank CEOs, traders meet CBN today for policy details
By Blaise Udunze
Barely 24 hours after the Central Bank of Nigeria (CBN) opted to leave naira’s fate to market forces, the Chief Executive Officers of commercial banks and currency dealers will be meeting with CBN’s officials today to discuss trading conditions under the new interbank foreign exchange regime.
This was even as the CBN could not hold any new dollar-naira trades on the interbank market yesterday but did $13.6 million of carryover trades at the pegged rate of N197.5.
Dealers said they expected no interbank currency market activity until the new trading regime starts on Monday but rates at the parallel market segment showed that naira sold at N370 to dollar as against the N365 on Wednesday.
The central bank on Wednesday said it would begin a market-driven foreign currency trading next Monday, abandoning its 16-month peg, which many believed overvalued the naira and harmed investments in the economy.
However, Financial Market Dealers Association (FMDA), met yesterday to evaluate the new policy and determine how trading will work, a treasury source said.
This is as the National Economic Council (NEC) welcomed yesterday the apex bank’s decision to adopt a flexible exchange rate policy. The executive body said it would help the economy and ease access to foreign exchange, while affirming Nigeria would be better off.
The Governor of CBN, Godwin Emefiele, at the unveiling of the “Flexible Exchange Rate Market,” on Wednesday said that this would mean a shifting away from a fixed exchange rate in an effort to increase the supply of hard currency.
According to him, CBN will use the new trading scheme to inject foreign exchange liquidity, if needed, which Nigeria hopes will ease severe dollar shortages caused by a slump in oil revenue.
“The market shall operate as a single market structure through the interbank and autonomous window. The exchange rate will be purely market-driven.
“To improve the dynamics of the market, we will introduce foreign exchange primary dealers who would be registered by the CBN to deal directly with the bank for large trade sizes on a two-way quote basis,” he said.
He hinted that the 41 items classified as “not valid for foreign exchange” would remain inadmissible in the FX market, while introducing non-deliverable over-the-counter (OTC) naira-settled futures, with daily rates on the CBN-approved FMDQ Trading and Reporting System.
The CBN boss further explained that non-oil exporters are now allowed unfettered access to their FX proceeds, which shall be sold in the inter-bank market.
To enhance liquidity in the market, he hinted that, “the CBN may also offer long-tenored FX forwards of six to 12 months or any tenor to authorised dealers”