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Why We Peg Naira at N380/$1 – CBN

From Joy Okeke, Lagos

The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele has reacted to the reported devaluation of the naira from N360/$1 to N360/$1 at the official window.

Emefiele who made the clarification on Saturday through the official twitter handle of the CBN, @cenbank, said, ”Godwin Emefiele clarifies supposed devaluation of Naira. Says it is an adjustment of price and not a devaluation of the currency.”

Daily Asset recalls that at the weekend the central bank devalued its official exchange rate from $307/$1 to N360/$1, reflecting the change on its website signalling a confirmation.

According to the CBN, IMTOs will sell to banks at N376/$1while banks will sell to the CBN at N377/$1. The CBN will sell to BDC’s atN378/$1 while the BDC’s will sell to end-users at “no more than” N380/$1.

Most analysts believe the central bank under Godwin Emefiele hates to use the term devaluation whenever there is an adjustment in the currency.

In June 2016, Godwin Emefiele announced Nigeria was moving to a “flexible exchange rate” policy a move that increased speculation and worsened the currency situation.

Similarly, in 2017 the CBN introduced the Investor andExporter window allowing the exchange rate to trade at between N360/$1 andN366/$1 while it retained N305/$1 as its official rate. It also created other exchange rate windows.

Meanwhile the apex bank and the bankers’ committee have agreed to back a N3.5 trillion stimulus package for the Nigerian economy.

According to an excerpt from a communique issued by the Bankers’ Committee, the committee also gave its full support to the policy measures amounting to over N3.5 Trillion earlier announced by the CBN in response to the economic impact of the COVID-19 on Nigeria.

The CBN had last week disclosed that it would support critical sectors of the economy with N1.1 trillion intervention funds. This was stated by the Godwin Emefiele, Governor of the apex bank.

In the statement, Emefiele explained that out of theN1.1trillion, about N1trillion would be used to support the local manufacturing sector as well as boost import substitution. He added that the balance of N100billion would be used to support the Health Authorities to ensure laboratories, researchers and innovators work with global scientists to patent and produce vaccines and test kits in Nigeria.

However, following the bankers’ committee meeting on Saturday, it appears the Nigerian economy will be receiving an economic stimulus of about N3.5 trillion. The communique did not explain how the funds will be disbursed but pledged to grant funding facilities (in Naira and foreign exchange) to pharmaceutical companies in the country to enable them to procure raw materials and equipment to boost local drug production in Nigeria.

The CBN did not reveal where it plans to get the N3.5trillion it plans to inject into the economy as a stimulus. However, it did mention that the N1.1 trillion will be disbursed as intervention funds.

Past intervention funds have been issued from the central bank’s balance sheet as part of its developmental programs.

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