Dipo Olowookere
By Dipo Olowookere
The Governor of the Central Bank of Nigeria (CBN), Mr Yemi Cardoso, has disclosed that the wild foreign exchange (FX) market volatility in the country is caused by distortions, especially by speculators, promising that this will end soon.
In an interview aired earlier this week on Arise Television, the CBN chief said efforts are being made to bring stability into the ecosystem and give the Naira the needed strength to withstand various shocks that have put it under pressure in the past months.
The Nigerian currency has performed badly against the United States Dollar in the forex market since the inception of the current administration of President Bola Tinubu on May 29, 2023.
In June 2023, after pressure from different quarters, the central bank unified the exchange rate and the Naira was devalued to about N750/$1.
This came after it was first reported a few days earlier that the apex bank had devalued the local currency to N631/$1 from N461.6/$1, which it denied.
“The attention of the Central Bank of Nigeria (CBN) has been drawn to a news report by Daily Trust Newspaper of June 1, 2023, titled CBN Devalues Naira To 630/$1.
“We wish to state categorically that this news report, which in the imagination of the newspaper is exclusive, is replete with outright FALSEHOODS and destabilizing innuendos, reflecting potentially wilful ignorance of the said medium as to the workings of the Nigerian Foreign Exchange Market.
“For the avoidance of doubt, the exchange rate at the Investors’ & Exporters’ (I&E) window traded this morning (June 1, 2023) at N465/US$1 and has been stable around this rate for a while,” a part of the statement issued then by the bank said.
The CBN had said the unification of the rates was to close the gap between the official market rate and the parallel market rate, but this strategy did not achieve its goal and the premium widened.
Last week, another devaluation of the domestic currency occurred and its value weakened by 51.2 per cent or N456.72 in the Nigerian Autonomous Foreign Exchange Market (NAFEM) to N1,348.62/$1 from N891.90/$1.
This created panic in the system as the prices of goods and services reacted with a significant increase.
In the interview monitored by Business Post, Mr Cardoso said speculators were behind the volatility in the forex market and their wings would be clipped soon.
“I think it is important to state that we have been in a situation where there has been a shortage of liquidity in the market arising from certain distortions and that has created volatility.
“We have looked at this over the past months and come up with certain policies designed to improve forex supply.
“I look forward to a time when people who require forex do not have to know anybody in the banks to get FX.
“A system that is open and transparent eliminates distortions and allows FX inflows, thereby allowing for price discovery,” Mr Cardoso said.
