The Governor, Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, on Wednesday said the central bank would review the amount banks could hold in dollars as their trading positions in the foreign exchange market.
Emefiele stated this in a telephone interview with Bloomberg.
He said the CBN had in December stopped banks from holding any amount of their shareholders’ funds in dollars to curb speculative attack on the naira.
The CBN governor, however, said the measure was only a stop-gap action to stabilise the naira.
He added that the central bank would review the amount banks could hold in dollars as their forex trading positions in due course.
Emefiele said, “There will be a review in due course. But I can tell you categorically it will no longer be one per cent. It will be less than one per cent. The reason we put a stop to one per cent is because we felt that it was too large to be held by banks as a trading position.”
The governor also said the CBN had no plans to change another rule adopted around the same time that dollars bought in the interbank market should be used within 48 hours or sold to the central bank.
He said the naira is “currently appropriately priced” and no new measures were being considered.
Emefiele added, “We are satisfied with the current adjustment that’s been done. It remains a free entry and free exit market.”
The naira has been battered by crude prices, which have dropped more than 50 per cent since June.
The naira depreciated almost 11 per cent in the past three months, the most among 24 African currencies tracked by Bloomberg.
The CBN had last month introduced several measures to bolster the national currency.
On November 25, the central bank devalued the naira by eight per cent and raised the benchmark interest rate by 100 basis points in a bid to stem capital outflows and defend the naira
It also increased private sector deposits Cash Reserve Ratio from 15 to 20 per cent.
However, analysts have said the measures implemented by the regulator had made it difficult for foreign investors to exit their holdings.
The Head, African strategy, Standard Chartered Plc, Samir Gadio, said, “There’s a risk that these measures last as long as the central bank feels it doesn’t have the ability to control the exchange rate,” he said by phone from London yesterday, before Emefiele announced the review.
But Emefiele said, “That is news to me that foreign investors are unable to exit their positions.
“If any foreign investor needs to exit its position, he should make a demand to a bank. If the bank cannot find those dollars to buy in the interbank market, the central bank will provide the dollars.”
But the CBN governor said, “The elections have nothing to do with our decisions. We look at the economy, we look at what’s happening in the banking system and the foreign exchange market.”
