Naira appreciates after CBN’s latest interest rate hike

…FX inflow through RT200 rise to $600m …as CBN approves N20bn rebate payment

Naira, Nigeria’s currency has appreciated by 1.16 percent against the dollar after the Central Bank of Nigeria (CBN) raised its benchmark interest rate by 100 basis points to 14 percent, the second time within two months.

After trading on Tuesday naira closed at N424.17 per dollar as against N429.13/$ closed on Monday at the Investors and Exporters (I&E) forex window, data from the FMDQ indicated.

Godwin Emefiele, governor of the CBN, who announced the monetary policy tightening on Tuesday after the two-day Monetary Policy Committee (MPC) meeting in Lagos, disclosed that foreign exchange inflow through the RT200 FX Programme in Q1 and Q2, 2022, had increased substantially to approximately $600 million as at June 2022.

Launched on February 10, 2022, by the apex bank the RT200 FX programme was designed to reduce the excessive pressure on the exchange rate and to increase FX inflows.

The CBN through the banks had paid a total of N3.5 billion in rebates to 150 exporters who took part in the RT200 programme, also known as Race to $200 billion scheme.

Emefiele disclosed that the CBN has approved the release and payment of N20 billion in rebate to exporters engaged in export of goods. “We are happy and delighted that a lot more people are embracing export business”, he said.

He said the MPC members also noted the increase in Diaspora remittances as a result of the Naira for Dollar incentive and urged the central bank not to relent in its efforts to encourage foreign exchange inflow to the economy.

On March 6, 2021, the CBN introduced the naira 4 dollar scheme as an incentive to boost inflows of diaspora remittances into the country.

“The MPC welcomed the Bank’s concerted efforts towards ensuring exchange rate stability, noting the current difficulties associated with managing the stream of external shocks impacting the economy,” Emefiele said.

Read also: CBN hikes rate to 14 percent to curtail inflation

The committee noted the marginal increase of 1.61 percent in the level of external reserves to $39.22 billion at the end of June 2022 from $38.60 billion by end of May 2022 due to the increase in inflows from non-oil sources.

On e-naira, Emefiele noted that it is making tremendous progress but that there is a need for a lot more enlightenment about the benefit.

He said the e-naira has the lowest cost and that it is targeted at the unbanked population. He disclosed that the regulator had conducted a test with MTN to provide a code for e-naira, adding that the agency banking available is going to be used to drive e-naira.

The CBN governor urged the banking populace to go to their banks and tell them that they want e-naira loaded in their wallet.

On election spending, Emefiele said the CBN has tools for monitoring liquidity in the system and is ready to mop up excess liquidity.

He threatened to place on Post-No-Debit (PND) any bank caught in unauthorised or illegal transactions during the election period.