CBN adjusts forex peg again, naira falls in black market

To bridge the gap of the exchange rate of the naira on the interbank market and parallel market, the Central Bank of Nigeria (CBN) has adjusted its exchange rate peg from N196.95/$1 to N197/$1.

A check on the apex bank’s website yesterday shows that the apex bank has changed the exchange rate peg, which it set last week.

The adjustment is the fifth since the bank introduced a tight control on the foreign exchange market in February. The bank said at the time it would sell dollars only at 198 naira to customers through the interbank based on direct orders by banks.

The local currency traded at N199.50 to the dollar on the interbank market at 1047 GMT, compared with the 197 per dollar rate it closed at on Wednesday.

At the parallel market, the naira slid to N243, down 0.83 percent from the previous day.

The persistent decline of the naira in the parallel market followed the introduction of new measures by the central bank last month, restricting access to hard currency at the interbank in a bid to conserve dwindling foreign exchange reserves.

Since the CBN about a month ago directed that 41 items would not be valid for foreign exchange at the interbank market and bureau de changes (BDCs) as part of measures to tackle the acute forex scarcity that hit the country, the naira has been on a freefall.

The parallel market where most of the importers of the 41 restricted items have turned to meet their forex demands, creating a huge gap between exchange rate at the parallel market and the interbank market.

The apex bank has however stated that it is unperturbed about the rate exchange at parallel, saying that it constitute only about one per of the country’s forex market.

In the last year that Mr. Godwin Emefiele assumed office as the CBN Governor; the naira has lost over 22 per cent of its value, having been devalued twice within this period.

In the bid to stabilize the currency, taken over seven steps, which include further tightening of Monetary Policy; closure of the Official Foreign Exchange Window and review of Operators’ Net Open Position (NOP).

Other measures put in place to salvage the naira are placement of 72-hour limit on FX utilization; introduction of a two-way order-based quote system; introduction of a band around the CBN’s tentative rate and ban on selected items from access to foreign exchange.

The apex has also spent substantial amount from the country’s foreign reserve defending the naira, which has saw deleting to $29 billion, before rebounding to $31.89 billion by July 7, 2015.

The CBN Governor while addressing the senate recently said, “These

policies have led to a significant stabilization in the exchange rate and an improvement in market sentiments.

Having earlier traded at as high as N206/US$1, the Naira-Dollar exchange rate has appreciated and remained around N197/US$1 in the interbank market in the past 5months.”

Some dealers believe the Monetary Policy Committee of the CBN, which would end its 245th meeting today, may come up with some resolutions that may affect the value of the naira.