Central Bank of Nigeria (CBN) yesterday finally succumbed to market forces by devaluing the naira by N29, after several months of propping up the local currency.
Effective from yesterday, the central bank, said all demands for forex should be channelled to the interbank foreign exchange market where the naira closed at N197 to $1.
The is coming less than two-and-a-half months after the CBN devalued the currency by 8.3 per cent or N13 by moving the midpoint of the official window of the foreign exchange market from N155/ $1 to N168/$1.
A statement from the CBN announcing the closure of the Retail Dutch Auction System (RDAS)/ Wholesale Dutch Auction System (WDAS) foreign exchange window said the closure of the RDAS window became imperative in order to forestall the emergence of a multiple rate regime and to preserve the nation’s foreign reserves, which stood at $32.66 as at February 16.
Ibrahim Mu’Azu, director of Corporate Communications of the CBN said it had taken the decision to close the official window to end the multiple exchange rate and also preserve the country’s dwindling external reserves.
The apex bank noted that the wide gap between the official and interbank value of the naira had engendered “undesirable practices, including round tripping, speculative demand, rent seeking, spurious demand and inefficient use of scarce foreign exchange resources by economic agents.”
In view of this, Mu’azu in the statement, said, “It has become imperative that appropriate actions be taken to avert the emergence of multiple exchange rates regime and pressure the country’s foreign exchange reserves. Consequently, we wish to inform all authorised dealers and the general public that with effect from the date of this press release, the rDAS/wDAS foreign exchange window with the CBN is hereby closed. Henceforth all demand for foreign exchange should be channeled to the interbank forex market.”
In line with the various assurances of its governor, Godwin Emefiele, the apex bank said it would “continue to intervene in the interbank foreign exchange market to meet genuine/legitimate demand.”