Published On: Wed, Feb 22nd, 2017

Banks welcome CBN measures of foreign exchange

forex shortfallsLAGOS, (CAJ News) – THE move by the Central Bank of Nigeria to channel over 370 million to the foreign exchange market is seen as a blow to the parallel market that has been thriving on the shortage of foreign currencies.
CBN announced the allocation on Tuesday to enable the public access funds for school, medical and personal travel needs.
End-users would pay rates not more than 20 percent above the prevailing interbank market rate.
Financial houses on Wednesday gave mixed expressions but the prevailing sentiment was that the move as a challenge to the parallel market.
Rand Merchant Bank said this was certainly a welcomed move insofar as increasing liquidity in the system and possibly dealing a blow to the parallel market rate that had reached an all-time high of USD/NGN516.
“In a flash note published yesterday, we highlighted that the recent foreign currency policy adjustments are positive moves towards easing dollar demand,” the financial think tank stated.
“… but we still view that there are further policy adjustments to be made or upward amendments to the de facto peg.”
FBN Quest stated, “Rather, we see a fine-tuning exercise to reduce the backlog and the gap with the parallel market.”
However, it is unsure about the basis of the cap of 20 percent above the interbank rate for retail foreign exchange sales.
“This does not prove that the CBN sees N360 per US dollar as an appropriate level,” the market watcher stated.
CBN has battled to retain the competitiveness of the Naira which has taken a tumble in the wake of the problems in the oil sector.
Nigeria is the continent’s biggest producer of crude oil.
CAJ News

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