• Tuesday, May 28, 2024
businessday logo

BusinessDay

As naira takes a hit CBN rules out devaluation

Naira

The Central Bank of Nigeria (CBN) said it has not and will not devalue the naira which has come under immense pressure as people mop up dollars amid concerns that the impact of the ravaging coronavirus coupled with crashed oil prices on the local currency could get worse.

The naira took another sharp hit on Thursday as money changers traded the local currency at N410 against the dollar at the black market.

Fears around naira free free fall is fueling speculations that the apex bank may be forced to allow the local currency float since it may no longer have sufficient reserves to continue to stabilize the local currency at the FX market.

Foreign Reserves dropped to slightly over $36bn last Monday.

In a mailed statement Thursday night clarifying its position, the CBN said it has noted “with displeasure, the rumours and speculative activities of unscrupulous players in the foreign exchange market, borne out of the impression that the CBN is on the verge of devaluing the Naira, and triggering panic in the FX Market.”

BusinessDay had earlier reported how foreign exchange users were buying up the dollar to hedge against potential devaluation of the naira as the price of oil has slumped below $34 per barrel.

The dollar was quoted at N410 at Apapa, Lagos, while in Festac area of the State, it closed at N400/$, according to investigations.

But the CBN said the spreading “rumours are false, unwarranted and calculated to serve their dubious and selfish ends.”

The CBN rather clarified that it has commenced “a robust and coordinated investigation in collaboration with the Nigerian Financial Intelligence Unit (NFIU) and related agencies to uncover the unscrupulous persons and FX dealers who are creating this panic, and the full weight of our rules and regulations will be meted out to them, including, but not limited to, being charged for economic sabotage.”

The CBN further explained that in nearly four years, it has successfully maintained relative stability in all segments of the foreign exchange market, which has enabled investors, households and other economic agents to plan and to conduct their genuine foreign exchange transactions with relative ease.

“The introduction of several foreign exchange management measures side-by-side with complementary interventions in food production and manufacturing has drastically reduced food importation, which hitherto constituted a large chunk of the pressure on the foreign exchange market,” it insisted.

The apex bank also noted that although the outbreak of the Coronavirus led to global economic slowdown, fall in the price of crude oil, and less inflow of dollars into Nigeria, the associated public health concerns have also led to factory closures in China, substantial drop in imports, widespread travel restrictions around the world, and cancellation of many conferences, sporting events, business travels, and FX orders.

“The size of Nigeria’s foreign exchange reserves remains robust and comfortable, given the current realities of Nigeria’s genuine and legitimate FX demand.

“As such, the CBN remains able and willing to meet all genuine demand for foreign exchange for legitimate transactions.

The CBN is also working with the fiscal authorities to properly and accurately dimension the immediate and expected impacts of the Coronavirus in order to respond comprehensively and at the same time, ensure a sound and stable financial system conducive for job creation and inclusive growth.

“In light of current circumstances and macroeconomic fundamentals, the CBN has not devalued the Naira.

“Consequently, the CBN will invoke the full weight of applicable sanctions on any persons and authorized dealers found to be involved in such disruptive and speculative market behavior,” it warned.

 

Onyinye Nwachukwu, Abuja