CBN adopts flexible exchange rate policy, retains all rates

Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has introduced a flexible exchange rate policy into the nation’s monetary policy system. This policy allows the exchange rate to be determined by forces of supply and demand.

The CBN Governor, Godwin Emefiele, who disclosed this today while addressing press men after the end of the two-day MPC meeting in Abuja, also revealed that the MPC decided to retain the Monetary Policy Rate (MPR) at 12 per cent, while also retaining the Cash Reserve Requirement (CRR) at 22.5 per cent and the Liquidity Ratio (LR) at the current rate of 30 per cent.

According to him, the CBN would within the next few days unveil the new guideline on the management of foreign exchange in the country.

Experts are of the view that there is possibility that the Naira would experience further decline against the dollar with new directive.

He said that following the recent drop in the country’s foreign exchange, it was high time the bank introduced greater flexibility in the management of foreign exchange.

The bank had been under severe pressure in the past few months to either devalue the Naira or adopt a flexible exchange rate policy.

Emefiele said following the recent depreciation in the country’s foreign exchange, time has now come for the bank to introduce greater flexibility in the management of foreign exchange.

He said while the country awaits the new policy to be unveiled soon, the bank would only fund critical transactions such as importation of vital machinery for production as well as essential basic raw materials that are critical for manufacturing which by their nature cannot be sourced locally.