ABUJA — The Central Bank of Nigeria (CBN), yesterday, said it would soon fine tune the exchange rate of the Naira, even as the nation’s currency depreciated further to N305 against the dollar in the parallel market.
Addressing journalists at the end of the Monetary Policy Committee (MPC) meeting, yesterday, CBN Governor, Mr. Godwin Emefiele, said the CBN would soon come out with efforts to fine tune the exchange rate framework.
This, he said, was to ensure “a more effective and liquid foreign exchange market, taking into account Nigeria’s strategic development priorities, with the policies being designed within an environment of regularly ensuring consistency with monetary and fiscal policies.”
The CBN governor gave no indication that he was ready to ease currency-trading and import restrictions that had kept the inter-bank exchange rate at 197-199 per dollar since March, even though they had been widely panned by investors, criticised by businesses and questioned by lawmakers.
He said the decision was reached, taking into account Nigeria’s strategic development priorities; with the policies being designed within an environment of regularly ensuring consistency with monetary and fiscal policies.
He said the 12 members of the bank’s MPC voted unanimously to keep monetary policy rate unchanged. It also held the cash reserve ratio for commercial banks at 20 per cent.
Emefiele said there had been no changes to the official naira rate to the dollar which has come under tremendous pressure due to a drying up of vital oil revenues.
Asked whether there would be a devaluation, Emefiele said: “The only answer I can give is that we are already working on different scenarios … under different crude prices.” He did not elaborate.
Giving details of the MPC meeting the CBN Governor said: “The committee observed that the last episode of low oil prices in 2005 lasted for a maximum period of eight months. However, the current episode of lower oil prices is projected to remain over a very long period.
“Consequently, it is imperative to brace up for a longer period of low government revenues from oil sources, which would necessitate hard and uncomfortable choices as the economy transits to more sustainable sources of revenue, consistent with the economic realities and strategic objectives of the country. In the circumstance, certain tradeoffs must be envisaged and duly accommodated.
“In view of the foregoing, the imperative for consistently sound and coordinated macroeconomic policy has become inevitable. In the medium term within which monetary policy is cast, the need to allow policy to produce the desired outcomes becomes a key consideration in the policy mix.
“Consequently, the bank is fine-tuning the framework for foreign exchange management with a view to ensuring a more effective and liquid foreign exchange market, taking into account Nigeria’s strategic development priorities; with the policies being designed within an environment of regularly ensuring consistency with monetary and fiscal policies.”
According to Mr. Emefiele, Nigeria’s foreign reserve currently stands at $28 billion.
How to manage reserves
On how to manage the reserves, the CBN boss said the apex bank was already building several scenarios around the oil price and that it would ensure the best options possible.
He said: “With time, you will see how we will provide the needed framework for a flexible forex regime. We are already working on different scenarios. And we will look at them. We will look at different scenarios at both management and the monetary policy committee.
“We will continue, as much as possible, to engage the fiscal authorities and share our positions to see that notwithstanding the drop in the oil prices, we will continue to run the government and continue to do business.
“We have said it before that the drop in oil prices is going to be with us for much longer than it used to be. Before, it used to be for about eight months. This time, it has been with us for more than 14 months and yet, we have not seen the light at the end of the tunnel. But we will continue to be alive to our responsibilities.”
Stamp Duties
On the difference the Stamp Duties policy would make in raising the non-oil revenue of the Federal Government, Emefiele explained that at this time that oil revenue was facing great challenges, the CBN had no option than to support the Federal Government on raising revenue from other sources.
“We will work with the banks to make sure that stamp duty is paid on each transaction above N1000 in the banks,” he said.
Retains MPR at 11%
Emefiele said the committee, in consideration of the headwinds in the domestic economy and the uncertainties in the global environment decided by a unanimous vote to retain the Monetary Policy Rate (MPR), Cash Reserve Requirement (CRR), Liquidity Ratio (LR) and the asymmetric corridor of +2/-7 around the MPR.”
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