The former CBN
Governor who gave the advice during a webinar tagged ‘United States of Naira:
What Price for Unification’ which was organised by AZA (a cross-border payment
platform and forex trading firm), stated that though the BDC is a small
percentage of the market, funding it will impact speculation on the country’s
currency.
Sanusi who disclosed
that the existing gap between the Nigerian Autonomous Foreign Exchange (NAFEX)
and BDC can be traced to inadequate foreign exchange caused by funding, also
noted that the COVID-19 pandemic has led to several economic shocks making
speculation difficult for the apex bank.
He said;
“I think what the
bank is trying to do is bridge that gap and I think moves have been made in
general in July that have brought the CBN rate and the NAFEX rates closer. But,
the BDC rates remain an outlier.
“It is a small
percentage of the market, but it does have an impact on speculation, which is
why it is important to fund that market.
“And once the
Central Bank has enough money and funds that market, it will probably converge.
So, I would not be interested in moving the rates towards N470, for example,
but I would like to see a convergence of CBN and NAFEX, which will take care of
over 90 percent of the transactions in the market and there is some small
funding for BDC rate to bring it back to that level.
“It is what the IMF
and the World Bank have asked for. It makes for positive transparency; it makes
for clarity of direction; it also reduces the speculative demand for naira. For
me, this is the Central Bank finally saying, basically, we will do what the
market has been asking for.
“There are lots of
the shocks the bank has no control over. It would be a brave governor of the
bank who would announce a target rate when he does not know how much is going
to come in or what is going to happen to the oil price tomorrow or the day
after, and the entire world is going through shocks.
“I think it is
extremely important that we recognise that the only clarity that the Central
Bank can give at the moment is to say we do plan to converge, and that means
the official rate is going to be devalued, but we are not going to do it in a
rapid and disorderly manner.
“But, if they want
to preserve the value of their currency, there is some virtue in waiting for an
orderly unwinding of these backlogs because we must remember that when Covid-19
hit and after the Russia-Saudi fiasco, oil prices went down to $10 a barrel.”
The CBN had adjusted
its official rate from N360 to a dollar to N381 to a dollar. But as of Friday,
the exchange stood at N379 to a dollar.
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