Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, has explained the rationale for operating multiple exchange rates, saying the bank’s decision had at all times been determined by the prevailing economic fundamentals.
He added that it was not uncommon that the dynamics of the external and domestic economy to lead to a change in regime.
Emefiele stated this at the opening of the regional course on exchange rate regimes and policies, organised by the West African Institute for Financial and Economic Management (WAIFEM).
The apex bank governor, who was represented by deputy director, monetary policy department, Omolara Duke, said: “Indeed, global economic and financial crisis, pandemics, currency crisis, commodity supply shocks and geopolitical tensions to name a few have determined the choice of our exchange rate regime.”
“For emerging developing economies like Nigeria where the demand for imports remains high, an appropriate exchange rate regime is required to safeguard capital outflow and ring-fence the external reserves.
“The thrust of exchange rate management by the Central Bank of Nigeria is to allow the market system to determine the exchange rate parity in an efficient manner devoid of the activities of speculators and rent-seekers,” he added.
Emefiele said the objectives of CBN’s exchange rate policy in Nigeria include preservation of the naira’s value, maintaining a favourable external reserves position and ensuring external balance without compromising the need for internal balance and the overall goal of macroeconomic stability.
Meanwhile, he also disclosed that the investors and exporters (I&E) window attracted over $50 billion in investments to the country within three years.
The I&E FX window is the market trading segment for investors, exporters and end-users that allows for FX trades to be made at exchange rates determined based on prevailing market circumstances.
Currently, naira trades at N415.64/$ at the I&E window.
“The CBN introduced the Investors and Exporters (I&E) Forex window to enable investors and exporters to purchase and sell forex at the prevailing market rate,” he said.
“This has attracted over US$50 billion in investment to the country within three years”.
