Fresh move by CBN to float Naira sparks concerns in Nigeria’s forex market

Nigeria’s forex market

The recent decision by CBN to increase the floating of the Naira in the foreign exchange market has elicited varied concerns within the country’s economic sphere.

Experts acquainted with the sector liken this move to the Naira liberalization initiative undertaken by the CBN approximately eight months ago.

The apex bank directed banks to ensure transparent pricing and trading of the Naira.

The forex market initially reacted negatively to the policies, causing the Naira to decline sharply to N1,500 per US dollar.

In the final week of January, the Central Bank of Nigeria (CBN) implemented several policy interventions aimed at stabilizing the currency, including measures to enhance transparency in the financial market and revise the FX market rate pricing methodology. These initiatives resulted in the devaluation of the Naira from N891.90 to N1,409.86 against the US dollar on January 26.

Additionally, the CBN issued directives to standardize reporting requirements on banks’ foreign currency exposure.

Despite initial concerns, the Naira has experienced marginal appreciation against the Dollar three times since the beginning of last week, Nigeria’s forex market.

US dollar supply surged by 180.59% to $440.13 million as banks rushed to comply with CBN regulations.

Meanwhile, there are differing opinions regarding the impact and effectiveness of these measures.

Muda Yusuf, Centre for the Promotion of Private Enterprise urged reversing the import duty exchange rate to prevent impoverishment.

However, Mazi Okechukwu Unegbu, supported the recent interventions by the CBN to stabilize the Naira, Nigeria’s forex market.

According to him, the country’s currency undervaluation necessitated the recent policy interventions by the apex bank to strengthen the Naira.

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Mr. Idakolo Gbolade, CEO of SD & D Capital Management, noted CBN’s recent measures aimed at devaluing the Naira.

Gbolade emphasized the importance of critically examining the policies implemented thus far and making necessary adjustments for effective implementation.

Prof. Godwin Oyedokun cited falling oil prices, import dependence, declining foreign investment, and weak diversification as key issues. He proposed a range of solutions to address these challenges and create a more stable economic environment, Nigeria’s forex market.

Stakeholders offer varied views on CBN interventions, proposing diverse solutions for Nigeria’s forex challenges.

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