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CBN technically devalues Naira to N380/$1

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Without any fanfare, the Central Bank of Nigeria (CBN) has technically devalued the naira exchange rate on the Investors and Exporters’ (I&E) window from the N366.7 to a dollar it closed on Friday, to N380.20 to a dollar. Trading data from Bloomberg terminal showed that there was very low appetite for the CBN open market operations (OMO) instruments offered Thursday, suggesting that foreign portfolio investors have since adopted a wait-and-see approach to the raging COVID-19 pandemic.

“Dear all, kindly be informed that the CBN has moved the rate of FX sales to FPIs from N366.70 to N380.20/$. We will advise as developments unfold,” was the message the CBN sent to traders which was trending on the Bloomberg terminal. To which end, the CBN directed bureau de change (BDC) operators in the country not sell the United States (US) dollars higher than N380 to end users. The previous N360 per dollar exchange rate was adopted in 2016.

A memo signed by director of the apex bank’s trade and exchange department, Ozoemena Nnaji, and addressed to banks and BDC operators, stated: “Please be advised that the applicable exchange rate for the disbursements of proceeds of IMTOs for the period Monday, March 23 to Friday, March 27, 2020 is as follows – IMTSOs to banks: N376/$1; banks to CBN: N377/$1; CBN to BDCs: N378/$1; BDCs to end users: not more than N380. Volume of sale to each market is $20,000 per BDC. Kindly note that the GBP rate should be derived from USD cross rate on the date of the sale.”

In a statement made available to Huhuonline.com, the apex bank maintained that the size of Nigeria’s foreign exchange reserves was robust, given the present realities of Nigeria’s legitimate FX demand. Furthermore, the CBN assured that it was able and willing to meet all forex demand for legitimate transactions, adding that it was working with the fiscal authorities to properly and accurately dimension the immediate and expected impacts of COVID-19 in order to respond comprehensively and ensure a sound and stable financial system conducive for job creation and inclusive growth. 

“The CBN wishes to note with displeasure, the rumours and speculative activities of unscrupulous players in the foreign exchange market, borne out of the impression that the CBN is on the verge of devaluing the naira and triggering panic in the FX market. These rumours are false, unwarranted and calculated to serve their dubious and selfish ends. We, therefore, wish to state as follows: We have begun a robust and coordinated investigation, in collaboration with the Nigerian Financial Intelligence Unit (NFIU) and related agencies to uncover the unscrupulous persons and FX dealers who are creating this panic.
 
“For nearly four years, the CBN has successfully maintained relative stability in all segments of the foreign exchange market, which has enabled investors, households and other economic agents to plan and to conduct their genuine foreign exchange transactions with relative ease. The introduction of several foreign exchange management measures side-by-side with complementary interventions in food production and manufacturing has drastically reduced food importation, which hitherto constituted a large chunk of the pressure on the foreign exchange market;
 
“Although the outbreak of the Coronavirus led to global economic slowdown, fall in the price of crude oil and less inflow of dollars into Nigeria, the associated public health concerns have also led to factory closures in China, substantial drop in imports, widespread travel restrictions around the world and cancellation of many conferences, sporting events, business travels, and FX orders. Consequently, the CBN will invoke the full weight of applicable sanctions on any persons and authorised dealers found to be involved in such disruptive and speculative market behavior.”