Saturday, November 23, 2024
Latest:
ECONOMYTOP STORY

CBN Governor’s speech at unveiling of new forex guidelines

editor

Full speech of the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, at the press briefing today in Abuja at the unveiling the broad framework and guidelines of the flexible exchange rate for the Naira.

Good afternoon distinguished members of the press, ladies and gentlemen welcome to the Central Bank of Nigeria.

The management of the CBN has called this press briefing in response to one of the commitments contained in the communique of the Monetary Policy Committee of 24th May, 2016.

Having consulted widely and prepared carefully, the Committee of Governor of the Central Bank of Nigeria is delighted to unveil to all stakeholders and the general public the broad framework and guidelines of the flexible foreign exchange rate at the interbank market which were alluded to at the end of the MPC meeting.

Before I proceed into the details of this new policy, please permit me to provide you with a brief context. We all know by now that Nigeria has been dealing with the effects of three significant and simultaneous global shocks which began around the third quarter of 2014. These include the over 70% drop in the price of crude oil, which contributes the largest share of our foreign exchange reserves, the global growth slowdown and geo-political tensions, along critical trading routes in the world and thirdly normalization of monetary policy by the United States Federal Reserve Bank.

In view of these head-wings, the CBN witnessed the significant decline in our foreign exchange reserves from as high as 42.8 billion dollars in January 2014 to about $26.7 billion as at June 10th 2016. In terms of inflows, the banks’ forex earnings have dropped from as high as $3.2 billion monthly sometimes in 2013 to current levels of below $1 billion a month.

Despite these outcomes, the demand for foreign exchange has risen significantly. For example,  in 2005, when we had oil price at about $50 per barrel for an extended period of time, our average import bill was N148.3 billion per month. In stark contrast, our average import bill for 2015 stood at about N917.6 billion per month. Unfortunately, the interplay between the reduced forex supply highlighted above and the rising forex demand accounted for a substantial drain in our foreign exchange reserves.

In order to avoid further depletion of the reserves, the CBN took a number of countervailing policy actions anchored on the prioritization of the most critical needs for  foreign exchange as well as maintaining stability in the exchange rate having allowed two adjustments from August 2014 to February 2015 which resulted in the movement from N155 to N197 per dollar we decided to manage the dollar-naira exchange rate at about $1 to N197 over the last 16 months, and also decided to allocate the available but limited foreign exchange to meet the following critical needs;

  • Matured letters of credit from commercial banks
  • Importation of raw materials plants and equipments
  • Importation of petroleum products and
  • Payment of school fees ETA, BTA and related expenses

Over these intervening periods, we are happy to note that these policies have yielded some positive developments in particular, we have managed to stabilize the exchange rate since February, 2015 thereby creating certainty for both household and business decisions and also underpinning the economic growth we recorded in 2015. We have largely eliminated speculators and rent seeker from the Fx market.  Our reserve, despite having fallen, is still robust and is able to cover about five months of Nigeria’s imports as against the international benchmark of three months. Furthermore the domestic production of goods restricted from the forex market has picked up considerably nationwide, thereby creating more jobs for many more Nigerians.

Despite these positive outcomes, the CBN has always maintained that it would continue to monitor situations underground and ensure that the banks policies reflect these facts and developments rather than the sentiments of any group or sectors. It is in the light of these principle that we now believe that the time is right to restore the automatic adjustment mechanisms of the exchange rate with the re-introduction of the flexible interbank exchange rate market.

The workings of this market will be consistent with the banks objectives of enhancing efficiency and facilitating a liquid and transparent forex market. Although the detailed framework and operational guidelines of the market will be released to the public immediately after this press briefing, permit me to highlight its key aspects;

  1. The market shall operate as a single market structure through the interbank and autonomous window.
  2. The exchange rate will be purely market driven using the Thompson Reuters and FMBQ order matching system as well as the conventional dealing book.
  3. The CBN will participate in the market through periodic intervention to either buy or sell foreign exchange as the need arises.
  4. To improve the dynamics of the market, we will pick primary dealers who would be registered by the CBN to deal directly with the bank for large trade sizes on a 2-way quote basis.
  5. These primary dealers shall operate with other dealers in the interbank market amongst other obligations that will be stipulated in the foreign exchange primary dealers’ guidelines which would also be released immediately after this press briefing.
  6. There shall be no pre-determined spread on foreign exchange spot transactions executed through the CBN intervention with primary dealers while all the forex spot purchases by authorised dealers are transferable in the interbank foreign exchange market.
  7. The 41 items classified as not valid for forex as detailed in a previous circular by the CBN shall remain inadmissible in the Nigerian forex market for foreign exchange.
  8. To enhance liquidity in the market, the CBN may also offer a long tenured forex forwards of tenure ranging between 6 and 12 months or any tenure to authorised dealers.
  9. Sale of forex forwards by authorised dealer to end users must be trade backed with no predetermined spreads
  10. The CBN shall introduce non deliverable over the counter naira settled features with daily rates on the CBN approved FMBQ trading and reporting system. This is an entirely new product in the Nigerian forex market, which would help moderate volatility in the exchange rate by moving non urgent forex demand from the spot to the futures market.
  11. The OTC forex features shall be in non-standardized amounts and different fixed tenures which may be sold on any date thereby ensuring bespoke maturity dates.
  12. Processes of foreign investment inflows and international money transfers shall be purchased by authorised dealers at the daily interbank rates. Also, non-oil exporters are now allowed unfettered access to their forex proceeds which shall be sold in the interbank market.

In terms of timeline, the management of the CBN has agreed as follows;

  1. The detailed operational guidelines for the flexible forex market will be released immediately after this press briefing.
  2. The guidelines for the selection and operation of the foreign exchange primary dealers will also be released immediately after this press briefing.
  3. Selected forex primary dealers will be notified by Friday 17th of June, 2016 and all other non-primary dealers will remain valid and eligible to participate in the market.
  4. Interbank trading under the new guidelines will begin on Monday, 20th of June, 2016 and
  5. The tenures and rates for the OTC naira settled forex features would be announced on Monday the 27th of June, 2016.

In closing, let me note that the CBN is strongly determined to make this market as transparent, liquid and efficient as possible. Therefore, we would neither tolerate unscrupulous behaviour nor hesitate to bring serious sanctions on offenders. The CBN expects all authorized dealers particularly to display the highest level of professionalism. We expect them to understand the spirit and letter of this transition to a market based system.

The CBN will not allow the system to be undermined by speculators and rent seekers and permit me to emphasise that any attempt to breach any aspect of the spirit and letter of the new framework would be heavily sanctioned by the CBN and this may indeed result in the suspension or withdrawal of the forex dealing licence of the any offending authorised dealer.

I therefore urge market participants to assist us in ensuring that this new system enables the CBN to pursue its mandate in a more effective and efficient manner which guarantees preservation of our scarce common wealth, stability of our financial system and growth of our economy to the benefit of all Nigerians.

I thank you all for listening I can now take your questions…………

You May Also Like

Restructuring for a United and Progressive Nigeria

editor

Check your salvation if you are still afraid of death at 70–Adeboye

editor

PDP’ll reclaim Ondo, Makinde, Adeleke boast

editor

39 thoughts on “CBN Governor’s speech at unveiling of new forex guidelines”

  • I just want to tell you that I’m newbie to blogs and absolutely enjoyed your page. More than likely I’m want to bookmark your blog . You really have good articles and reviews. Thank you for sharing with us your website page.

  • I simply want to tell you that I am very new to blogs and absolutely enjoyed your web-site. Most likely I’m planning to bookmark your site . You definitely have superb well written articles. With thanks for revealing your blog.

  • I just want to mention I am very new to blogging and really loved this blog. Very likely I’m planning to bookmark your blog post . You absolutely have very good well written articles. Thank you for revealing your blog.

  • I simply want to say I am just newbie to blogging and seriously loved you’re web site. Almost certainly I’m going to bookmark your blog post . You absolutely come with beneficial article content. Thanks for sharing your webpage.

  • I simply want to say I am very new to blogging and definitely enjoyed your web site. Likely I’m want to bookmark your blog post . You absolutely have really good well written articles. Regards for revealing your blog.

  • I simply want to say I’m new to blogging and definitely enjoyed this blog site. Very likely I’m likely to bookmark your blog . You certainly come with great posts. Regards for sharing with us your website.

  • I simply want to tell you that I am very new to blogs and definitely enjoyed you’re blog site. Likely I’m planning to bookmark your site . You really come with good article content. Appreciate it for sharing with us your blog site.

  • I just want to mention I am just new to blogs and actually liked your web blog. Almost certainly I’m planning to bookmark your blog post . You definitely come with remarkable well written articles. Thanks a bunch for revealing your web site.

  • I just want to tell you that I am just very new to blogging and really enjoyed your page. Probably I’m planning to bookmark your site . You actually have outstanding article content. Kudos for sharing with us your web-site.

  • I simply want to mention I’m very new to blogs and really savored your web blog. Very likely I’m planning to bookmark your site . You surely have exceptional articles and reviews. Appreciate it for sharing your blog.

  • I simply want to say I’m beginner to blogging and site-building and truly liked your website. Most likely I’m want to bookmark your site . You definitely come with awesome writings. Appreciate it for revealing your webpage.

  • I keep listening to the news talk about getting free online grant applications so I have been looking around for the finest site to get one. Could you tell me please, where could i acquire some?

  • Hello.This post was really motivating, especially because I was browsing for thoughts on this issue last Thursday.

  • Finally I found what I was looking for, only took 4 pages of search results.

  • Usually I do not post on blogs, but I would like to say that this article really forced me to do so! Thanks, really nice article.

  • This is getting a bit more subjective, but I much prefer the Zune Marketplace. The interface is colorful, has more flair, and some cool features like ‘Mixview’ that let you quickly see related albums, songs, or other users related to what you’re listening to. Clicking on one of those will center on that item, and another set of “neighbors” will come into view, allowing you to navigate around exploring by similar artists, songs, or users. Speaking of users, the Zune “Social” is also great fun, letting you find others with shared tastes and becoming friends with them. You then can listen to a playlist created based on an amalgamation of what all your friends are listening to, which is also enjoyable. Those concerned with privacy will be relieved to know you can prevent the public from seeing your personal listening habits if you so choose.

  • Hi, i think that i saw you visited my website so i came to “return the favor”.I am trying to find things to improve my site!I suppose its ok to use a few of your ideas!!|

  • Quickbooks=@@>=1.844>722>!!6675!!=@@= QuiCKbOOks Support Phone NumBER >>>!@!!1.844.722.6675 >>@@!!!!!Vikram++++=Quickbooks=@@>=1.844>722>!!6675!!=@@= QuiCKbOOks Support Phone NumBER >>>!@!!1.844.722.6675 >>@@!!!!!QB KA KIng++++=Quickbooks=@@>=1.844>722>!!6675!!=@@= QuiCKbOOks Support Phone NumBER >>>!@!!1.844.722.6675 >>@@!!!!!QB KA baap–here now–agya–call now ++++=Quickbooks=@@>=1.844>722>!!6675!!=@@= QuiCKbOOks Support Phone NumBER >>>!@!!1.844.722.6675 >>@@!!!!!Intuit point of sale support, ((1((844))722((6675))),Intuit phone help, ((1((844))722((6675))),Intuit help desk, ((1((844))722((6675))),Quickbooks help desk, 1844.722.6675Quickbooks payroll support number, ^^1^844^722^^6675,Quickbooks payroll support, ^^1^844^722^^6675,Quickbooks premier support, ^^1^844^722^^6675,Quickbooks premier support phone number, ^^1^844^722^^6675,Quickbooks POS support, ^^1^844^722^^6675,Intuit technical support phone number, ((1((844))722((6675))), Intuit support phone number, ((1((844))722((6675))),Intuit POS support number, ((1((844))722((6675))),Intuit point of sale support, ((1((844))722((6675))),Intuit phone help, ((1((844))722((6675))),Intuit help desk, ((1((844))722((6675))),Quickbooks help desk, 1844.722.6675

  • Aloha, I found your blog on Bing Weblogs and think it is pretty intriguing and delivers fantastic material. Thank you regarding this superb post, I will certainly promote this on Twitter. Have a pleasant day on interior design ideas for home and office

  • I admire the beneficial information and facts you provide in your posts. I will bookmark your blog and have my children examine up right here often. From: home interior decoration design ideas

  • Hiya! You some kind of professional website hosting? Great message. Are you able to tell me learn how to subscribe your blog?

  • Hi there! This article could not be written any better! Reading through this post reminds me of my previous roommate! He constantly kept preaching about this. I most certainly will send this post to him. Fairly certain he’ll have a very good read. Many thanks for sharing!|

  • Hey, thanks for sharing I always look forward to reading your posts one of the few blogs I still follow home decorated

  • I just got up from sleep and I am already reading your post. It means something! Really useful post on homedecorated.net Thanks!

  • Interesting, I wonder what the statistics are on your first point there on homedecorated

  • Never Ever give up: Even though you fail initially; Dont manage to get a great deal of views at first, do your self a favour, do not give up.

  • I have been checking out some of your articles and i must say pretty good stuff. I will make sure to bookmark your website.

  • download film terbaru sub indo has diamond like clarity and also in order for this to be striking you must use both that and.

  • Pingback: 4shared mp3

Comments are closed.