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CBN may ease forex controls as demand drops

By on October 7, 2015

The Governor, Central Bank of Nigeria, Mr. Godwin Emefiele, says he will consider easing restrictions on currency trading if demand for foreign exchange drops further.

Emefiele told delegates at a conference on Africa hosted by the Financial Times in London on Monday that the controls were necessary and were working to limit the demand for dollars, Bloomberg reported.

The CBN had little choice in imposing the curbs in order to preserve foreign-currency reserves, he said.

“Once we have achieved a result we can allow ourselves to look at a freer market,” the governor said.

Emefiele imposed restrictions on trading and introduced bans on purchases of dollars by certain importers after the naira plunged to a record low in February following a drop in oil revenue.

With the backing of President Muhammadu Buhari, Emefiele has resisted calls to ease the controls and devalue the naira despite criticism from investors, businesses and fellow members of the Monetary Policy Committee.

The restrictions have reduced liquidity, prompting JPMorgan Chase to remove the nation’s bonds from its emerging-market bond indexes last month.

“I think it’s working and I think you should be patient with us,” Emefiele said. “Demand for foreign exchange has dropped.”

The naira has traded at an average of 198.91 per dollar on the interbank market since the beginning of March after reaching a record low of 206.32 on February 12.

On Monday, the CBN weakened its official exchange rate peg on the Lagos interbank market to N197 per dollar from N196.95 it set last week.

It was the seventh adjustment since the regulator introduced tight currency controls in February, Reutersreported.

The naira traded weaker in the parallel market to 223 on Monday.

 

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