CBN bows to pressure, adopts flexible foreign exchange

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria has asked the number one bank of the nation to commence the adoption of a flexible exchange rate policy.

After the MPC meeting at the Bank’s headquarters in Abuja, while addressing journalists today, the CBN Governor, Godwin Emefiele disclosed that with the new directive, the bank would in a few days make available a new guideline for the management of foreign exchange in the country.

This development means that the exchange rate of foreign currencies would be determined by the laws of supply and demand and not the Federal Government and with the high demand for dollars in Nigeria, the naira might plummet further.

Emefiele further said the time had come to introduce flexibility in the foreign exchange market and noted that before the new policy would be unveiled, the bank would only fund very important transactions like the importation of machinery for production and raw materials needed for manufacturing that cannot be sourced locally.

He said following the recent depreciation in the country’s foreign exchange, time has now come for the bank to introduce greater flexibility in the management of foreign exchange.

Furthermore, at the meeting, the MPC decided to retain the Monetary Policy Rate at 12 per cent,while also retaining the Cash Reserve Requirement at 22.5 per and the Liquidity Ratio at the current rate of 30 per cent.

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