There are strong indications that President Muhammadu Buhari, might crash the dollar against the naira in the coming weeks, following the Monetary Policy Committee, MPC, meeting of the Central Bank of Nigeria, CBN, set to begin this week in Abuja.
Post-Nigeria gathered that top on the agenda during the meeting, would include the review of foreign currency impact on the naira and the rising impact of inflation to the economy.
Meanwhile, ahead of the meeting, the CBN has lifted the ban on forex sales to bureaux de change, BDC, operators.
In a circular, signed by the Acting Director, Trade and Exchange Department of the CBN, W.D. Gotring, the development is part of efforts to ensure the stability of the naira exchange rate at the parallel market.
Gotring, noted that the decision will also encourage all critical stakeholders to participate in the foreign exchange market.
He said, “Furthermore, authorized dealers and BDCs are required to render returns of the operation daily and monthly to the Director, Trade and Exchange, CBN via e-FASS application, in accordance with extant regulation.
”For the avoidance of doubt, failure by any authorized dealers and BDC operators to render returns as and when due, shall attract appropriate sanctions, including withdrawal of dealership’’, Gotring said.
It could be recalled that in January this year, the apex bank had stopped all forms of forex sales to BDCs, accusing the operators of round tripping and frustrating the policies meant to stabilize the naira.
However, despite the stoppage, the local currency has continued to depreciate; presently the naira is exchanging at N305 to the dollar in the parallel market and N378 to the dollar in the black market.
Aside, other financial analysts have argued that the MPC meeting may likely weigh options on the exchange rates in view of rising fiscal constraints.
The meeting is coming at a time the International Monetary Fund, IMF, had disclosed that the Nigerian economy will contract by 1.8 percent, as it is already in recession.
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The Managing Director, Afrinvest West Africa Limited, Ike Chioke, while reacting to the scheduled MPC meeting, said: “We believe the CBN will adjust benchmark policy rate to reflect this tight policy thrust, thus completing its policy back flip by taking the first option tomorrow and next.
“We believe taking this route will aid the CBN in stabilising the forex interbank market and buy some time for fiscal and monetary authorities to engage in more long term structural reforms to buy competitiveness,” Chioke said.
He added that, “The need to regain investor confidence in the aftermath of the newly launched forex framework should be a paramount item on the agenda of the MPC.”
He predicted that MPC will raise interest rate by 100 basis points to 200 basis points and keep other rates constant to attract portfolio capital inflows, which is yet to respond to currency market flexibility.
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