In response to the recent weakening of the Nigerian naira on the parallel market, the Central Bank of Nigeria (CBN) has initiated a series of foreign exchange intervention strategies aimed at curbing currency speculators.
Folashodun Shonubi, Acting Governor of the CBN, disclosed this to reporters at the Presidential Villa following a meeting with President Bola Tinubu. Shonubi discussed the bank’s concerted efforts to stabilize the naira’s value.
Shonubi emphasized that the instability of the naira’s value on the parallel market is influenced not solely by economic factors, but also by speculative demand. While he refrained from disclosing specific intervention details, he warned speculators that the proposed measures could result in substantial financial losses for them. He was optimistic that the implemented measures would yield positive results within a short span of time.
Furthermore, Shonubi underscored the CBN’s overarching objective of establishing an efficient and equitable operational environment that mitigates adverse effects on the average Nigerian citizen’s life.
Shonubi stated, “Mr. President is very concerned about some of the developments in the foreign exchange market. One of the things we discussed is what could be done to stabilize and improve the liquidity in the market and also the goings-on in various other markets, including the parallel market.”
He added, “He’s concerned about its impact on the average person, since many activities that we do, which are purely local, are still referenced to exchange rates in the parallel market.”
Shonubi further revealed that the Central Bank of Nigeria (CBN) has taken proactive steps to alleviate strain on the naira within the parallel market.
Simultaneously, the CBN has issued a formal circular to authorized dealers, international money transfer operators, and the wider public, introducing constraints on the exchange rate applicable to naira payouts for Diaspora remittances.
The circular, dated August 9, 2023, carries the signature of Ozoemena Nnaji, Director of the Trade and Exchange Department at the CBN.
According to the circular, the CBN has set parameters governing the exchange rate for naira payouts related to Diaspora remittances.
The directive stipulates that the naira disbursements for proceeds from Diaspora remittances must remain within a specified range of -2.5 per cent to +2.5 per cent of the previous day’s average rate as observed on the Investors’ and Exporters’ window.
The circular read, “Further to the circular referenced TED/FEM/PUB/FPC/001/004 dated July 10, 2023 and the meetings held with all banks and IMTOS, the Central Bank of Nigeria hereby announces an allowable limit of -2.5% to +2.5% of the Investors’ and Exporters’ window average rate of the previous day as the anchor rate for the naira payout option.
“Accordingly, all banks and International Money Transfer Operators are required to adhere to the stipulated limits. Please note and ensure strict compliance.”
Shonubi had last week said the diversion of Diaspora remittances to the parallel market was putting pressure on the local currency.
-Jesse Voyamba
