Naira free fall: CBN gives banks nod to fix forex rates

 

 

.We’re almost on the way to Vanezuela, PDP Govs raises alarm over rising cost of living

Following persistent fluctuations of the naira exchange rate, the Central Bank of Nigeria (CBN) has permitted banks to sell foreign exchange at rates determined by them.

 

With the banks determining their own prices, customers may find better deals on FX compared to the previous system while customers can compare the prices offered by different banks, as prices are set by the market.

 

The Director, Financial Markets Department of the CBN, Dr Omolara Omotunde, said in a circular FMD/DIR/PUB/CIR/001/012 addressed to “All Authorized Dealers”, that the apex bank had decided to discontinue “any cap on the spread on interbank foreign exchange transactions and restrictions on the sale of interbank proceeds.”

 

The circular emerged on a day CBN Governor Olayemi Cardoso told the Senate that the bank had suspended granting of Ways and Means to the federal government until the settlement of the outstanding balance.

 

Consequent upon the removal of the caps on the spread on interbank foreign exchange transactions, the banks are now free to establish their own prices based on supply and demand.

 

This allows the market to determine what it considers a fair rate for foreign currencies, particularly the US dollar.

 

The banks now have more flexibility to sell FX to anyone they choose, and this change according to some analysts, could result in a quicker and more convenient access to foreign currency for businesses and individuals.

 

The CBN said Authorised Dealers are to continue to conduct their foreign exchange transactions on a ‘Willing Buyer and Willing Seller’ basis and are to “strictly adhere to high ethical standards in their dealings in the foreign exchange markets. This includes but not limited to adopting appropriate price disclosures and transparency for transactions.”

 

But the CBN is demanding transparency from the banks, requiring them to clearly display their prices, refrain from deceiving customers, and report all transactions to it (CBN).

 

It promised to continue to monitor the market and make adjustments as required.

 

The CBN expects this new approach to promote fairness and efficiency in the FX market, eliminate artificial distortions and ensure that everyone can access FX at a reasonable price.

 

It was gathered that the apex bank also intends to encourage greater foreign investment by simplifying the process of buying and selling FX, attract more foreign investors with a view to stimulating the national economy and discourage the use of the black market.

 

International Money Transfer Operators (IMTOs) have started complying with the January 31, 2024 CBN directive stopping them from dollar transfers to Nigeria. These include WorldRemit and Western Union.

 

Payments are now to be made in naira in respect of inbound transfers of remittance services from outside the country.

 

On Foreign Exchange Management, the CBN boss said the nation’s “foreign exchange market is currently facing increased demand pressures, causing a continuous decline in the value of the naira.

 

“Factors contributing to this situation include speculative forex demand, inadequate forex supply, increased capital outflows, and excess liquidity.

 

“The shift to a market-driven exchange rate was intended to create a stable macroeconomic environment and discourage currency hoarding.

 

“However, short-term volatilities are attributed to arbitrage and speculation.

 

“To address exchange rate volatility, a comprehensive strategy has been initiated to enhance liquidity in the FX markets.

 

“This includes unifying FX market segments, clearing outstanding FX obligations, introducing new operational mechanisms for BDCs and IMTOs, enforcing the Net Open Position limit, Open Market Operations and adjusting the remunerable Standing Deposit Facility cap among others.

 

The People’s Democratic Party Governors’ Forum (PDPGF), has decried the rising cost of living in Nigeria saying the nation is sliding down the road of Vanezuela’s economic turmoil under President Bola Tinubu’s watch.

 

Chairman of the forum and Governor of Bauchi State, Bala Mohammed, said this in an interview with newsmen shortly after reading the communique of a meeting of the forum held at the Oyo State Governor’s Lodge, Asokoro, Abuja, on Monday.

 

He said, “At the onset of this administration, we supported the removal of subsidy, we believed that there were safeguards, we believed that if we took collective decisions, we should go by it.

 

“But certainly, we have seen that it is a free fall for the naira. The cost of living is going high, we are almost on the road to Venezuela.”

 

Mohammed also said, “We are working closely with the federal government since the inception of this administration. The rising cost of living is not only  under the purview of the federal government.

 

“We have been partnering together with them to make sure that we don’t bring any distraction but the monetary and economic policies rests squarely with the federal government.

 

“The majority of Nigerians voted for this administration, so we are doing so much across party lines and on bi-partisan basis, within the Nigeria governors forum within the National Economic Council to make sure that we cushion the effects of some of these policies.

 

“We have reached out to our people and opened the food reserves in a manner that it will provide some succour to our people at the lower level.”

 

The Bauchi State Governor described the PDP as the most democratic and experienced party in the country.

 

He said, “We have been at the seat of governance and Nigerians took a decision to bring APC at the centre and we respect their sensibilities and sense of judgement of Nigerians.

 

“So, we are giving concrete opposition but not insulting anybody. But ultimately the decision squarely rests with Nigerians and other organs in the country to make sure that we do things that will bring succour to all of us.”

 

On the Edo State Governorship Election, he said, “We are 100 percent behind Edo and you can see that there is no rancour, there is no division and we are very much behind the National Workings Committee, the state chapter of the party and indeed the governor to make sure that we go together in unison to produce a successor for the most respected eldest governor in the governors forum.”

 

Earlier, while reading the Communique, after the forum’s meeting , Mohammed said, “The meeting deliberated on various issues of interest and concern to the Forum, the Peoples Democratic Party (PDP) and the country and issued the following Communiqué:

 

“The meeting reviewed the State of the Nation and noted the hardship being faced by Nigerians as a result of the economic and security challenges facing the nation.

 

“The Forum consequently urges the Federal Government to as a matter of urgency embark on initiatives involving all the sub national governments to bring a lasting solution to the crises.

 

“The PDP Governors will continue to play their part in the effort to bring security and succour to our people.

 

“To this end, we reiterate our call for State Police with appropriate safeguards to avoid any abuse or overreach by any tier of government.

 

“The Forum decried the falling value of the Naira and requested the monetary and fiscal authorities to find appropriate solutions.

 

“The meeting further reviewed recent developments in the Peoples Democratic Party and  committed to leading efforts to revamp and reposition the party to serve as an effective opposition to the ruling Party in Nigeria.

 

“Furthermore, the Forum passed a vote of confidence in the Iliya Damagum led National Working Committee (NWC) of the Party and urged it to put in motion the machinery for convening meetings of the appropriate organs of the party – from Caucus to National Executive Committee (NEC) as soon as possible.”

 

Those who attended the meeting were: Gov. Bala Mohammed ( Bauchi State), Gov Siminalayi Fubara ( Rivers State)-Vice Chairman, Gov. Seyi Makinde (Oyo State)                     – Member  (Host), Gov. Ahmadu Umaru Fintiri -(Adamawa State)– Member.

 

Others include: Gov. Caleb Mutfwang – (Plateau State) – Member, Gov. Dauda Lawal        -(Zamfara State)- Member, Gov. Kefas Agbu       (Taraba State)- Member, Gov. Godwin Obaseki- (Edo State) – Member, Dep. Gov. Ifeanyi Ossai – Enugu State – Member, Dep Gov. Monday John Onyeme (Delta State)- Member.