The Street's Response to the CBN - The Tale of Contradictions

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Wednesday, March 1, 2017  1.00PM /Otto Abasiekong   

On February 20, 2017 the Central Bank of Nigeria (CBN) announced new measures to its foreign exchange policy, which was a response to the demands of Nigerians for a review of the FX policy.

In the new FX provision, the CBN in its statement affirmed that it will provide additional funding to banks, to ease the challenges of Nigerians accessing foreign exchange  for Medical needs, Personal & Business travel (PTA, BTA) and school fees.

The CBN expects such retail transactions to be settled at a rate not exceeding 20 percent above the interbank market rate.  

Exactly a week now there has been mixed reactions to the policy, while some experts believe it is a welcome development, others feel it is another policy meshed in uncertainty that will complicate the FX market.

48hrs ago it was reported that the CBN injected about $180ml into the banks, to boost liquidity in the foreign exchange market, but operators especially at parallel market are not seeing the traction.

One of the players in the market at the street (Aboki), who pleaded anonymity said as at yesterday, the demand for FX soared, but supply at the parallel market was low.

He said the parallel market players at the Bureau De Change, were buying at the range of N400, N435 to N440 and was being sold to customers at N403, N438 and N443. The operator complained that there was no clear rate set by the CBN for the parallel market since the release of the new FX policy guideline, which is the reason for the different rates in the market.

A staff of one of the leading Banks in the country, who also pleaded that his name be withheld for this report, commended the CBN on the policy which will to an extent ease the FX burdens of Nigerians. He noted that the decision to ease the utilization/allocation rules on commercial banks, will go a long way in making the banks more viable.

The banker was concerned about the 41 items, for which the CBN has placed FX restrictions. Also, servicing big corporates who have demands for FX remains a challenge.

At the moment the word from the street is; within one week of the new FX policy, a need for clarity arises from the monetary authorities as the parallel market shows uncertainty, in the rates and even scarcity.

This becomes necessary as international investors have maintained that only a Nigerian foreign exchange market that is transparent and has liquidity, will regain their confidence.

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