CBN Reacts To Volatility In FX Market

CBN Reacts To Volatility In FX Market

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Folashodun Shonubi, the acting governor of the Central Bank of Nigeria (CBN), expressed confidence that the “volatile times” in the foreign exchange (FX) market would soon stabilize.

Shonubi made these remarks after the monetary policy committee (MPC) meeting held in Abuja on Tuesday.

This is the first time the CBN has expressed concerns about the ongoing fluctuations in FX rates since the announcement of the unification of all segments of the FX market.

Since the float of the naira, there have been consistent fluctuations in the FX rates, with no signs of stability at the official window.

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On July 19, the naira experienced an all-time low of N803.9 per dollar.

However, the local currency recovered by 6.58 percent, closing at N742.93 on July 18, but it then depreciated further to N860/$ at the parallel market the following day.

In response to these fluctuations, Shonubi emphasized that the CBN’s focus is not on “unifying rates” but on ensuring a more effective unification of the FX market.

The bank believes that the market needs time to become more efficient. The current volatility is partly due to the market finding its level and the existence of pent-up demand that the current supply may not be sufficient to satisfy. As this demand is gradually met, the market is expected to become more efficient and stable.

Shonubi also clarified that the FX market, which was previously known as the investors and exporters (I&E) window, is now open to anyone and everybody through licensed institutions. The CBN’s role in the market is to intervene and maintain a relatively stable level. The bank has its views on what that level should be, and it will continue to intervene, either by buying or selling, to bring the market to that level.

While the current volatile times are expected in the short run, Shonubi expressed confidence that they would moderate sooner rather than later. The CBN remains committed to intervening in the market as necessary to achieve stability.