CBN Rules Out Devaluation of Naira, Insists FX Reserves Robust

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Image Credit: Jean Chung/Bloomberg

By Dipo Olowookere

The Central Bank of Nigeria (CBN) on Thursday allayed fears of investors on the rumoured possibility of devaluing the Naira as a result of global economic crisis caused by coronavirus and crash in crude oil prices.

In a statement issued by its spokesman, Mr Isaac Okorafor, the apex bank said the size of the nation’s foreign exchange reserves was large enough to absorb any external shock.

It threatened to investigate and deal with forex dealers causing this panic in the country. The CBN further said it would prosecute those behind the fears for economic sabotage.

“We have begun a robust and coordinated investigation in collaboration with the Nigerian Financial Intelligence Unit (NFIU) and related agencies to uncover the unscrupulous persons and FX dealers who are creating this panic, and the full weight of our rules and regulations will be meted out to them, including, but not limited to, being charged for economic sabotage,” the statement said.

It further threatened to “invoke the full weight of applicable sanctions on any persons and authorised dealers found to be involved in such disruptive and speculative market behaviour.”

The central bank used the opportunity to inform Nigerians that speculations that it was on the verge of devaluing the Naira is not only “false (but), unwarranted and calculated to serve their dubious and selfish ends.”

It insisted that, “The size of Nigeria’s foreign exchange reserves remains robust and comfortable, given the current realities of Nigeria’s genuine and legitimate FX demand. As such, the CBN remains able and willing to meet all genuine demand for foreign exchange for legitimate transactions.”

However, the CBN admitted that the outbreak of the coronavirus has led to global economic slowdown, fall in the price of crude oil, and less inflow of dollars into Nigeria. It stressed that the associated public health concerns have also led to factory closures in China, substantial drop in imports, widespread travel restrictions around the world, and cancellation of many conferences, sporting events, business travels, and FX orders.

The apex assured that it was working with the fiscal authorities to properly and accurately dimension the immediate and expected impacts of the coronavirus in order to respond comprehensively and at the same time, ensure a sound and stable financial system conducive for job creation and inclusive growth.

“For nearly four years, the CBN has successfully maintained relative stability in all segments of the foreign exchange market, which has enabled investors, households and other economic agents to plan and to conduct their genuine foreign exchange transactions with relative ease.

“The introduction of several foreign exchange management measures side-by-side with complementary interventions in food production and manufacturing has drastically reduced food importation, which hitherto constituted a large chunk of the pressure on the foreign exchange market,” the statement said.

Business Post reports that yesterday, the Naira depreciated against the United States Dollar to N400/$1 at the black market, but at the time of filing this report Friday afternoon, it has appreciated to N380/$1.

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