CBN’s forex policy halts naira’s free-fall

Written by on February 26, 2015

There has been some level of stability in the foreign exchange market as the persistent free-fall of the local currency has been halted.

The naira has been trading between N198 and N200 after the closure of the retail Dutch Auction System (rDAS) window by the Central Bank of Nigeria (CBN).

The Central Bank, on Wednesday, last week closed the retail Dutch Auction System/wholesale Dutch Auction System (rDAS/wDAS) segment of the foreign exchange market and quoted an exchange rate of N198/US$1.00 as the official selling rate, inferring a devaluation at the interbank FX market.

The development was prompted by serious pressure on the naira at the interbank market, which widened the spread between the official and interbank rate to over N38.00 and made more people buy and keep dollars for resale at higher price.

The naira, on Wednesday, at the inter-bank market, sold for N198 to the dollar.

Financial Market Dealers Quote, FMDQ, a group comprising Nigeria’s main commercial banks and the central bank, said commercial banks have also been banned from re-selling CBN dollars to other banks, another attempt to end speculation in the Naira.

The CBN, in scrapping its window of direct sale of foreign exchange to end users on February 18, 2015, said all foreign exchange needs are to be sourced from the inter-bank market whose rate ranges between N197-N198 to a dollar.

This implies that Nigerians who need foreign exchange will now approach their banks and buy at the ruling rate.

 


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