A view shows Nigeria’s Central Bank headquarters in Abuja, Nigeria November 22, 2020. REUTERS/Afolabi Sotunde/File Photo Acquire Licensing Rights
ABUJA, Oct 12 (Reuters) – Nigeria’s central bank said on Thursday it plans to intervene in the country’s foreign exchange market occasionally to boost liquidity, while ending an eight-year ban on 43 items that had been restricted from accessing forex on the official market.
The ban, which covered items such as rice, cement and poultry, was imposed as part of the unorthodox policies under former central bank Governor Godwin Emefiele in an effort to prop up the naira currency.
The lifting of the ban will cheer analysts and investors who had been warning that the restriction showed the central bank was still maintaining some form of capital controls.
The Central Bank of Nigeria (CBN) also restated a pledge by new Governor Olayemi Cardoso to quickly clear the bank’s backlog of unsettled forex obligations to local lenders, estimated at about $7 billion.
Africa’s largest economy has struggled to get to grips with chronic dollar shortages on the official market, where trading volumes have steadily declined, causing the naira to slump to a record low against the dollar on the parallel market.
“As part of its responsibility to ensure price stability, the CBN will boost liquidity in the Nigerian Foreign Exchange Market by interventions from time to time,” central bank spokesperson Isa Abdulmumin said.
“As market liquidity improves, these CBN interventions will gradually decrease,” he said in a statement.
The naira has been weakening on the parallel market due to speculative activities and as excess demand is funnelled into the informal market, widening the gap with the official market, where restrictions on trading the currency were lifted in June.
The central bank said it would continue to promote orderliness and professional conduct by all market participants to ensure market forces determine exchange rates on a “Willing Buyer-Willing Seller principle”.
The bank also reiterated that the prevailing foreign exchange rates should be referenced from its website and from other recognised trading systems to promote “price discovery, transparency, and credibility in the forex rates.”
Abdulmumin said the central bank seeks to attain a “single forex market” and “consultation is ongoing with market participants to achieve this goal.”
Reporting by Camilus Eboh; Writing by Elisha Bala-Gbogbo; Editing by Mark Heinrich, Jane Merriman and Leslie Adler
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