CBN mute on FX as MPC meeting underwhelms

The Central Bank of Nigeria (CBN) announced its monetary policy decisions on Monday without addressing the acute dollar shortages in its foreign exchange (FX) market, which is perhaps the biggest issue on the front burner of the economy. 

Investors and analysts were hoping the CBN would provide some clarity around its exchange rate management. 

For instance, there’s been confusion around why the CBN still quotes N360/$ as the official exchange rate on its website even though the same rate is quoted on FMDQ at a weaker rate of N380/$. 

Updates on the foreign exchange backlog were also keenly anticipated and perhaps fresh assurances for investors whose funds remain stuck in the country. 

The CBN was also expected to state whether it was behind the latest action by banks to suspend or reduce the amount their customers can spend abroad using debit cards in a bid to limit foreign currency settlement risk. 

The last time banks took this action in 2016, it was ordered by the CBN.

Analysts say the dollar spending limit announced by banks is yet another worrying sign of the country’s worsening dollar shortages made more severe by the sharp fall in the price of oil, Nigeria’s main export.

The apex bank is battling to conserve dollar reserves that are down 19 percent from a year ago. Last week it depreciated the currency on the official market, prompting the naira to weaken on the black and over-the-counter spot markets.

Bankers say it now takes more than six months to settle foreign lines of credit.

Nigeria is yet to resume forex sales to retail currency traders after it banned international travel as part of a lockdown measure to slow the spread of the coronavirus that has killed 778 people and infected more than 36,000. 

The Monetary Policy Committee (MPC) voted to hold all policy parameters constant with the benchmark interest rate remaining at 12.5 percent.