CBN goes tough on currency speculators over naira free fall

The Central Bank of Nigeria (CBN) has announced new foreign exchange intervention measures aimed at clamping down on activities of currency speculators allegedly responsible for the naira volatility at the parallel market, also known as ‘black market’.

Currency speculators, according to industry analysts, are individuals who engage in the act of buying and selling foreign currencies not because they need to pay for an import or investing in a foreign business,but with the motive of taking advantage of fluctuating exchange rates.

Folashodun Shonubi,acting governor of the CBN, made the disclosure to State House correspondents at the Presidential Villa after briefing President Bola Tinubu on what the bank was doing to halt the slide of the naira.

Shonubi explained that the volatility of the naira in the parallel market is not solely driven by economic factors, but also speculative demand, adding that the primary purpose of his presence at the Presidential Villa was to reassure the president that the CBN was taking decisive action to address the concerns raised.

The acting  CBN governor,while stating that he would not disclose specific details of the proposed intervention measures, warned speculators that the proposed measures could potentially lead to significant losses for them.

He also expressed confidence that the measures being implemented would yield positive outcomes within a few days, assuring that CBN’s ultimate goal is to create an efficient and reasonable operating environment that minimises the negative impacts on the average Nigerian life.

In his words, “Mr President is very concerned about some of the goings on in the foreign exchange market. One of the things we discussed is what could be done to stabilise and what could be done to improve the liquidity in the market and also the goings on in the various other markets, including the parallel market.

“He’s concerned about its impact on the average person, since, unfortunately, a lot of activities that we do, which are purely local, are still referenced to exchange rates in the parallel market.

“We’ve discussed and I’ve shared with him that we’re doing to improve supply. If you look at the official market, you’ll find that that market has been fairly stable and the spreads of the difference have not fluctuated as much.

“We do not believe that the changes going on in the parallel market are driven by pure economic demand and supply, but are touched by speculative demand from people.”

Shonubi explained further that the intention of the move is to ensure the environment operates at a level that’s more efficient, but also that is also very reasonable and does not have a negative impact to the best that we can on the lives of the average person.

Meanwhile, as part of the new measures, the CBN has issued a circular to all authorised dealers, international money transfer operators and the general public.

The circular, which was signed by Ozoemena Nnaji the Director, Trade and Exchange Department, CBN,placed limits on the exchange rate for naira payout of Diaspora remittances.

The CBN directed that the naira payment option for proceeds of diaspora remittances should be made within a limit of -2.5 per cent to +2.5 per cent of the previous day’s average rate on the Investors’ and Exporters’ window.

The circular reads: “Further to the circular referenced TED/FEM/PUB/FPC/001/004 dated July 10, 2023 and the meetings held with all banks and IMTOS, the Central Bank of Nigeria hereby announces an allowable limit of -2.5% to +2.5% of the Investors’ and Exporters’ window average rate of the previous day as the anchor rate for the naira payout option.

Accordingly, all banks and international money transfer operators are required to adhere to the stipulated limits.