Business
CBN Market Restriction Boosts Naira
The moves by Mr Sanusi Lamido, the new governor of Central Bank of Nigeria (CBN) to address the nation’s economic problems have started yielding fruitful result as the naira gained rapidly from N180 per dollar to N50. This is a good development that would move economy forward but certain measures should be put in place to grow the nation’s foreign exchange earnings.
Sanusi, during the week, had removed the restriction placed in the market by his predecessor, Professor Chukwuma Soludo, to limit the movement of the dollar from the CBN to authorised foreign exchange (forex) dealers and within the banking industry.
During his maiden address in Abuja recently, Sanusi announced the reintroduction of wholesale Dutch Auction System (DWAS) with unfettered access to CBN dollar by the Bureau de Change operators in order to stimulate activities in the interbank and stabilise the foreign exchange market.
Banks were also allowed to trade their dollars bought from the CBN at the interbank market. The apex bank also said that the foreign exchange. Net Open Position (NOP) of banks has been increased from 2.5 per cent to five per cent of shareholders’ funds with effect from July 13, 2009.
CBN governor said that “All Class ‘B’ BDC’s hitherto banned from the official market could now participate directly in the CBN window but only those with valid licences are eligible and they were required to make a caution deposit of $20,000 each, Class ‘A’ BDC’s capital were also reduced from N500 million to N250 million through allocation of foreign exchange now differ in magnitude between Class ‘A’ and ‘B’ BDcs given the different levels of capitalization.
These major decisions taken by the CBN had led to an increase in the level of confidence reposed in the apex bank by the market operators. As a result, many speculators were forced to off-load their stock of dollar in order to reduce their future loss. Many BDC’s that were hitherto finding it difficult to get dollar in the market also enjoy some sense of relief and exchange rate at the parallel market moved down ward.
Again, government should control fiscal spending to ensure that there is no excess money in circulation.