CBN Tweaks Forex Peg Again as Naira Falls in Black Market

Mr. Godwin Emefiele, Governor of CBN

 

Nume Ekeghe with agency report

The Central Bank of Nigeria (CBN) has adjusted its exchange rate peg to N197 against the dollar from the N196.95 it set last week, data on the bank’s website showed  The latest adjustment was the fifth since the bank introduced a tight controls on the foreign exchange market in February.

The bank said at the time it would sell dollars only at N198 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 on Thursday, compared with the N197 per dollar rate it closed on Wednesday.

At the parallel market, the naira depreciated to N243 to a dollar, 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.

Reuters quoted dealers to have said the outcome of a monetary policy committee (MPC) meeting of the central bank due today could affect the naira. A Reuters poll showed the bank could hold interest rates for now.

Meanwhile, analysts at CSL Stockbrokers Limited have also predicted that the CBN's MPC will maintain its status quo on rates and the currency. They based their prediction on the fact that a devaluation at this time could further increase the price of imported items and cause the Consumer Price Index (CPI) to rise in coming months.

They also argued that it could "trigger another round of capital problems in the banks as an increase in the naira carrying value of the US dollar loan book of most of the banks could negatively impact their Capital Adequacy Ratios.

Calls for a devaluation of the naira have increased in recent weeks following the Central Bank of Nigeria’s  move to directly manage access to US dollars in the interbank market.