Dwindling Naira Valuation: CBN Shuts Down Official Foreign Exchange Window

Following several months of battling with an ever widening margin between the value of the naira at the official market and the interbank end, the Central Bank of Nigeria (CBN) has closed its twice weekly sale of foreign exchange through the retail Dutch Auction System (RDAS), thereby, tactically devaluing the currency which has reportedly risen to N200 to the dollar in recent times. In a statement issued and signed by the director of Corporate Communications, Ibrahim Mu’Azu,
The apex bank 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.

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 channelled 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.”

Meanwhile some market operators have commended the move of the CBN saying it is a tactical move to ensure that the fate of the naira does not worsen. According to the head of Research at Sterling Capital, Sewa Wusu, 

“The closure of the rDAS is a tactical move to bridge the gap at the various segment a of the market instead of announcing another round of announcing another round of devaluation. Thus the devaluation has been done through the closure of the RDAS.”

Also, the chief executive of Financial Market Dealers Association, Wale Abe noted that the CBN noted that the CBN had changed tactics after its previous efforts had not yielded the desired results.

“What the CBN did is a change of methodology. If a method is being inefficient, you can replace it with another. What is important is that supply should meet demands at the interbank”, he stated.

The naira has however added value selling at N197 from N198 to the dollar which it was on Tuesday.

Source: Leadership