CBN to Nigerians: Volatility in FX market to moderate soon — we’re intervening

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

Shonobi spoke to journalists after the monetary policy committee (MPC) meeting in Abuja on Tuesday.

This is the first time the apex bank is expressing concerns about the continued fluctuations in FX rates since it announced 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 sign of stability at the official window.

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

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

Responding to the issue, Shonubi stressed that the apex bank has no business with “unifying rates”, rather, the bank is to ensure that the unification of the FX market is more effective.

“We believe that we need to encourage the markets to be more efficient and to be more effective and that [it] takes a bit of time,” he said.

“Some of the volatility you’ve seen over the period has been driven by that same fact that the market needs to find its level and also the reality that there’s pent-up demand which current supply may not be sufficient for and as we ease and satisfy the pent-up demand, [we] will begin to see a more efficient market that runs.

“We also need to understand the dynamics of pricing in the market. We feel we should actually stop calling it the investors and exporters (I&E) widow because it is now much more than the I&E.

“It’s a market where everybody and anybody through the licensed institutions can participate. So, we expect that over time, sooner rather than later the volatility you are seeing would normalise.” 

Speaking on the CBN’s responsibility in the market, Shonubi said “the role of the central bank is to intervene and keep the market at a fairly stable level”.

“We have our views as to what that level is and as the market continues to oscillate around that level, if there’s a need for us to intervene either by buying or selling. That’s the role of the central bank,” he added.

“We have started intervening and we’ve been doing it for a while and we will continue to intervene to bring the markets to the levels that we believe it should be.

“Right now and in the short run these volatile times are expected but we expect them to moderate sooner rather than later.”