Business
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The Central Bank of Nigeria explains the sudden appreciation of naira in the foreign exchange market
THE Central Bank of Nigeria, CBN, has explained the recent appreciation of naira against major international currencies in the foreign exchange market, attributing it to the apex bank’s decision to deepen its intervention in the market.
Isaac Okorafor, acting director, Corporate Communications, CBN, told journalists at a press conference in Sokoto on Friday, March 3, that the bank provisions had outstripped demand on two consecutive interventions in recent times.
According to him, on the first occasion, the CBN placed $500 million but only N$370 million was taken. He stated that on a second occasion, the apex bank placed $230 million and only $221 million was taken, showing that the pressure was easing in the market.
He refuted reports in social media that the current appreciation of the naira was because a self-acclaimed whistleblower who exposed the alleged corruption in the forex market. It was alleged that some people received dollars at a rate as low as 61 kobo/$1.
“I want to state and make it categorical that there is no relationship, whatsoever, between the allegation by the so-called person that dollar was being sold at 61 kobo and the current appreciation of the Naira. I want to state that what led to the appreciation of the Naira include the following: The CBN has done its intelligence work in the foreign exchange market and we came to the realisation that much of what was driving the demand in the bureau de change, BDCs. and the parallel market was a bubble, speculation.
“And we reasoned that since there was pressure on those two segments from people seeking foreign exchange for PTA (Personal Travel Allowance), medicals and tuition, that if we successfully address those needs that the pressure will come down,” he explained.
The other issue was that the level of our reserve before now. “We didn’t feel comfortable enough to do the kind of intervention that we required. Now we have decided to undertake the intervention at this time because we are a bit more comfortable with the current level of our reserve. And because of that we intervened in the market and the market reacted positively and the Naira began gaining strength. Let me also state and prove that when we placed $500 million in the market, only $370 million was taken. And that tells you that it was all bubble.
“The real demand was $370 million. When we placed $230 million in the market, only $221 was taken up. It is as simple as that. Anyone who has gone foul of the law and the law has caught up with him should go and face his or her case and stop causing confusion among participants in the market. I need to make this clear,” he said.
— Mar 13, 2017 @ 01:00 GMT
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