Don't Miss


Home   >   Business   >   Industries   >   Banking   >   CBN will ease forex restrictions in the future – Osinbajo

CBN will ease forex restrictions in the future – Osinbajo

By on October 6, 2015

Nigeria will keep foreign currency restrictions for now to preserve the country’s currency reserves amid falling oil revenues but the Central Bank of Nigeria will ease the rules in the long-term, Vice President Yemi Osinbajo has said.

The current “restrictions are definitely short term. There is no question about that,” Reuters quoted Osinbajo as telling reporters late on Saturday.

“So, long term, we expect that the CBN will ease restrictions as we go along.” He added.

The CBN Governor, Mr. Godwin Emefiele, had defended its decision to tighten foreign exchange controls by excluding 41 items from the interbank forex market a few months ago.

According to a statement by the CBN, the country spends an estimated N1.3tn annually on items that could be manufactured locally.

Emefiele maintained that the huge amounts of money Nigeria was spending on importing things that could be produced locally had become a significant drag on the nation’s foreign exchange reserves.

But the Lagos Chamber of Commerce and Industry and other market analysts warned that the policy could lead to the closure of many factories.

They also noted that the policy had caused considerable pressure on the Bureau de Change segment of the market and also widened the gap between the official and parallel forex markets.

United States lender, JP Morgan, had last month expelled Nigeria from its Government Bond Index-Emerging Market over issues relating to lack of transparency in the nation’s forex market.

Meanwhile, yields on Nigerian bonds are seen dropping across the board this week in anticipation of increased liquidity in the banking system from retired Treasury bills and refunds from cash reserve requirements.

“The market is very liquid now because of the injection of cash from matured treasury bills and expectations of additional liquidity from the CRR refunds by the CBN,” one dealer told Reuters.

The CBN had said it would inject an additional N300bn ($1.5bn) into the banking system after it cut the cash reserve requirement to 25 per cent from 31 per cent about two weeks ago.

“Pension funds and banks are expected to rev up buying of fixed income assets this week because of the increase in available cash in the system,” another dealer said.

Yields on the benchmark 2024 paper rose to 15.12 per cent on Friday from 14.74 per cent the previous week, while the longest tenor paper rose to 15.04 per cent against 14.97 per cent.

Dealers expected the yields to fall below 15 per cent this week when more liquidity hits the banking system.

Yields on Kenyan Treasury bills are expected to keep rising, but at a slower pace, due to rising interest rates which are attracting foreign investors to Kenyan assets and to improved subscription levels, according to Reuters.

The central bank will auction 91-day, 182-day and 364-day Treasury bills worth a total 12 billion shillings ($115m) in two sales this week.

“We forecast Treasury bill yields are beginning to reach their peak as foreign investors pile in, giving the recent shilling strength more momentum,” a fixed income trader at Kestrel Capital, Alex Muiruri, said.

 

[Punch]