CBN reverses foreign exchange policy

Ok now I am worried. Soludo might have been getting it quite wrong mixing politics with sound economic policies during his last few days in office, but he did put in a lot of economic thoughts while making those policies. The forex market is gradually becoming stable now though with an apparent disparity between what CBN offers and what is being sold on the black market. But that margin has started narrowing because the market has finally started adjusting to stricter controls. Liberalisation brings in elasticity, which when uncontrolled spirals out of hand. Very much like everything else in Nigeria. It is imperative that extra caution is taken before rushing to change policies when the market is still adjusting. Don't push pawns where you are weak.

Nothing is permanent in life except change! But Human beings are not very receptive to changes. New person, new idea and new era. In this new dispensation, I see a ray of hope in the effort to stabilize the Naira especially in the "spread between buying and selling". But how do you control the illiterate black market dealers to comply with the rules? They need adequate education and information on their operations. Finally, any erring operators must be sanctioned be it Banks or Bureau-De-Change.

This is nothing but open door policy for forex to be available in the black market. Of course the beneficiaries are the one and same people represented by the CBN Governor.

its unfortunate that olu sees the cbn governor as representing a section of the people. Shouldnt people be more responsible when making comment on a matter of this magnitude.

Posted by Olu Ojo on Jul 10 2009 This is nothing but open door policy for forex to be available in the black market. I am with this statment. CBN / Govt of Nigerian is supposed to clear its attention towards the treatment of need of foreign exchange between the genuine importers and others who never bring their imports thru proper and never like to pay any duties and charges. People must be told wher this BDCs money is spent.

Changes are very much deduced and implemented as a feedback into a system. Every system needs constant feedback to maintain its stability. My views on the policy change is dependent on the fact that the market is already experiencing stability while the margin between official black market and the CBN is narrowing once more. RDAS was introduced to strain the market and allow the forex market shape itself, it was simply an economic policy that douses the market elasticity over time. Obviously re-introducing WDAS (which got the market to the terrible state late last year) is quite suitable, if and only if the long term impact is properly evaluated. I am just a man on the street and always want the lowest exchange rate to trade but very concern about what happens tomorrow. Not short-sighted.

I don't know why people are quick to point to conspiracy theories. As CBN Governor, he's doing what has been done before. Before RDAS was brought back in January, the WDAS was used for months on end. Nigeria is one of the countries with tight FOREX policies and it hasn't helped us.

Olu, the banks were making a kill under the retail dutch auction. If you recall, black market hit N180/$1 at a time, while official rate was N146/$1. Much of that difference were made by the banks making use of fake documents. Let's see how the new policy goes. My only concern is that the official rate should be elastic. What I mean by this is that if the price of oil goes up the naira should appreciate drastically to the dollar let's say between N138 and N140 to the dollar. It should not be fixed. That is how Canadian dollar is to the American dollar.

The idea of categorising BDCs into Class A and Class B does not make sense.Instead, the apex bank should ensure total compliance with foreing exchange transactions by the BDCs and therefore reverse to the former capitalisation requirments .Again, some commercial banks' workers used the RDAS to enrich themselves. . The emphasis should be on transperancy and total compliance with the guilines and not the capital base.The whole idea is to stabilize the value the naira to achieve macroeconomic objectives. Well done!