Hassan Mahmud, has suggested that the institution is not worried about
the naira’s valuation but is instead interested in “boosting dollar
supply on the currency market.”
Naira Depreciation
According to a report,
Mahmud’s remarks were made just a day after the local currency touched a
new low of 532 naira for one dollar on the parallel market. This new
parallel market exchange rate differs significantly from the CBN’s
current spot exchange rate of approximately 411 naira to the dollar.
Yet, in spite of the glaring differences between the two rates,
Mahmud, who was addressing a virtual investor conference, insisted that
fixing this gap is not the priority of the central bank. Mahmud
explained:
We are not really bothered much about valuation. What we are worried about is the supply side and the confidence in the system.
Forex Shortages
Since the second quarter of 2020, Nigeria has grappled with shortages
of foreign exchange which in turn increase pressure on the naira. To
ease pressure on the naira, the CBN has devalued the currency three
times since March 2020. In addition, the central bank has imposed a
series of restrictions that are aimed at controlling the movement of
foreign exchange.
Despite the devaluations and the restrictions imposed, the naira has
continued to lose ground against major currencies like the U.S. dollar
due to what Mahmud calls “market failures.” According to the CBN’s
director of monetary policy, it is these market failures that prompted
the central bank to “adopt a managed float regime.”
source link : https://news.bitcoin.com/nigerian-central-bank-we-are-not-worried-about-nairas-valuation/
