Nigeria’s central bank has announced that it is planning to step in and intervene in its forex market for the naira. It will have to boost the available liquidity there on certain occasions, as the naira experiences volatility.
The bank will also have to lift its ban on 43 different items from the forex market that it had in place for the 8 previous years. This included items such as poultry, rice, and cement. These were unusual measures that the central bank Governor, Godwin Emefiele, put in place in the past. This was only one of a number of measures he took to support the Nigerian naira. Now that the naira is in trouble, new measures will be necessary. To give an idea of its current level, the rate of naira to pounds is 0.0011, but this is only the official value.
Individuals from the outside, both investors and analysts, will be happy to hear this news. They had been lamenting the control of capital by the government. So it is understandable why they will therefore be glad to see a change here.
Additionally, they announced their commitment to clear up any debts. This means paying off forex debts to lenders within Nigeria, coming up to $7 billion in value. The central bank had collected these debts over quite a while, and Olayemi Cardoso, the new governor, plans to pay them off quickly.
Dollar Shortage and its Impact on the Nigerian Naira
The problem the country and its currency are facing has to do with the lack of dollars in their forex market. This has been an ongoing problem for a while now. The trading volumes in this area have actually been decreasing. This has then had a knock-on effect of destabilising and lowering the Nigerian naira. The currency has a premium of 37% over the official rate in parallel markets. A lot of demand and speculation have been weakening the currency, and action is needed to improve the situation.
