By Niyi Olaoye
Ahead of the release of modalities for the implementation of the adopted flexible exchange rate policy by the Central Bank of Nigeria (CBN), the interbank market has already appreciated to N290 to the dollar on Friday.
This was sequel to increased perception that CBN has withdrawn from the weekly foreign exchange (forex) intervention, which forms part of the newly adopted policy, paving the way for banks and Bureau De Change (BDC) operators to source forex autonomously and sell according to market dynamics.
It is almost two weeks now that the Central Bank of Nigeria (CBN) had announced that it was going to introduce a flexible exchange rate policy; the delay hitherto has increased rumour among market operators as the delay persists.
It will be recalled that the apex bank had further indicated that it would release details of the policy “in a few days”.
Financial experts are, however, of the opinion that the announcement suggest that the bank was now favourably disposed to a partial float of the naira and will therefore allow the market determine the value of the naira against major currencies at the interbank.
The frenzy occasioned by the announcement is now turning into a bout of uncertainty as Nigerians ponder on what’s next.
Information reaching us however revealed that the CBN has been consulting with major stakeholders in the bid to formulate a policy that could work. Consultations are said to be held with executives of commercial banks, money market operators, some state governors, members of the National Assembly and senior members of the Buhari Government which is thought to be the reason for the delay.
Unfortunately, the further the delay the more rumours continues to spread on what could be the fate of the exchange rate. Some suggest there could be an exchange rate band of between N250 – N300 while others suggest an even wider band. We have also read hawkish analyses which seem to suggest that the CBN may even backtrack on the policy as they have not “obtained political support” for any form of devaluation.
According to them, ‘We, however, believe strongly that there will be no going back on a full or semi float of the naira when the CBN eventually makes a pronouncement considering the damage it will inflict on an already fragile economy. The CBN is mindful of this and cannot afford to depart from expectations.
It is also unlikely that the CBN will delay beyond next week as we could see a release of a circular on or before the close of business Friday”.
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