Eromosele Abiodun with agency report
The Director of Monetary Policy, Central Bank of Nigeria (CBN), Hassan Mahmud yesterday stated that said the apex bank is worried about boosting dollar supply on the currency market and not valuation of the naira.
Mahmud told a virtual investor conference that: “We are not really bothered much about valuation. What we are worried about is the supply side and the confidence in the system.”
The local currency hits a record low of N532 to the dollar on the parallel market on Monday amid the CBN’s recent actions to channel demand from the unofficial market, where the naira is trading at much lower levels.
Nigeria is battling dollar shortages brought on by low oil prices following disruptions linked to the COVID-19 pandemic.
The central bank has devalued the currency three times since March 2020, but the naira has continued to weaken.
In June, the CBN Governor Godwin Emefiele, said Nigeria’s spot naira rate was overvalued by up to 10 per cent, citing the bank’s real effective exchange rate model.
Reuters quoted Mahmud to have said that the level of the naira is expected to adjust based on demand but that market failures had made the bank adopt a managed float regime.
Nigeria has several exchange rates operating in parallel, a system put in place during a 2016 oil price crash because the government was seeking to avoid a large official devaluation of the naira as a matter of national pride.
Mahmud said the spot rate is the reference rate and that he expected a convergence of Nigeria’s several exchange rates, a gap, which has frustrated investors.
At the close of business yesterday, the naira traded at N411 against the dollar on the official spot market, in the range of N407 to N412 where it has been since June.
