Skip to main content

Nigerian Central Bank Lifts Forex Restrictions on 43 Items — Market Forces to Determine Exchange Rate

Nigerian Central Bank Lifts Forex Restrictions on 43 Items — Market Forces to Determine Exchange Rate

The Nigerian central bank said on Oct. 12 that it had lifted foreign exchange restrictions imposed on the importation of 43 items. The central bank said the restrictions initially imposed in 2015 may have contributed to the weakening of the naira on the parallel foreign exchange market.

Unifying the Naira’s Multiple Exchange Rates

The Central Bank of Nigeria (CBN) announced on Oct. 12 that it had lifted foreign exchange restrictions “hitherto placed on the importation of 43 items.” According to the central bank, the lifting of the restrictions fits with its broader objective of unifying the local currency’s multiple exchange rates as well as reining on inflation.

In a statement that addresses why the restrictions (initially imposed on June 23, 2015) have been removed, the CBN claimed the measures were forcing importers to source the scarce resources on the parallel market. Prior to Nigerian President Bola Tinubu’s foreign exchange market reforms, the local currency had traded at just under N500 per dollar for more than a year.

On the parallel market where the greenback was, and still is widely available, importers were forced to pay premiums starting from 20% to get U.S. dollars. Some experts on the Nigerian economy insisted then that the official exchange rate greatly overvalued the local currency. Others even implored the central bank to devalue the naira-to-dollar exchange rate, but this was resisted.

CBN’s Forex Policy Under the Tinubu Government

However, immediately following his inauguration as Nigeria’s new leader, Tinubu reportedly ordered the CBN to abandon the fixed exchange rate regime. On why the CBN has moved to remove the restrictions, the statement read:

The restrictions pushed importers into the parallel market, contributing to the surplus demand for forex. This weakened the parallel-market exchange rate, pushing up prices.

The central bank, which is now led by Olayemi Michael Cardoso, said the growing gap between the official and parallel market exchange rate could well indicate that the rate “has not been setting a clearing price.” Therefore, by removing restrictions, the CBN suggested that this would not only foster “orderliness and professional conduct” but also ensure market forces determine the exchange rate.

The CBN also said the removal of the restrictions would benefit local producers in the form of cheaper imported inputs while consumers are expected to “benefit from cheaper retail products.” The bank also claims that this policy change will see closed factories
re-opening.

Register your email here to get a weekly update on African news sent to your inbox:

What are your thoughts on this story? Let us know what you think in the comments section below.



from Bitcoin News https://ift.tt/kK6EuBW
Labels:

Comments

Post a Comment

Popular posts from this blog

Mt Gox Creditors Updated, Trustee Says Rehabilitation Custodian Is ‘Currently Preparing to Make Repayments’

On August 31, 2022, the Mt Gox trustee Nobuaki Kobayashi explained in a recent letter that the rehabilitation custodian is “currently preparing to make repayments” to Mt Gox creditors. Trustee Updates Mt Gox Creditors — Repayment Date and Exchange Still Unknown Last week speculation and rumors concerning the release of 140K bitcoin ( BTC ) from Mt Gox littered social media platforms and headlines. Bitcoin.com News covered the situation six days ago as a number of people and Mt Gox creditors called the rumors “ fake news .” During that same period of time, a bitcoin whale transferred 10,000 BTC to unknown wallets, and a 2018 annotation , heuristics, and clustering methods show the funds likely originated from the June 2011 Mt Gox hacks. Following the mysterious whale transfer, last Wednesday, Mt Gox published an official update from the court trustee Nobuaki Kobayashi that explains the court is “currently preparing to make repayments” to creditors. Mt Gox creditors have been wait...
Post a Comment
Read more

International Crypto Exchange Luno Adds Bitcoin Cash Trading

Luno exchange has added bitcoin cash trading to the platform following feedback from its client base. BCH is now only the third cryptocurrency available for trading on the exchange, in addition to BTC and ETH , but more options could be on the way once Luno determines that they are credible enough. Also Read: Bitflyer Adds Bitcoin Cash Trading Across Europe and the US Luno Adds Bitcoin Cash Trading Luno, the London-headquartered company formerly known as Bitx, recently announced that bitcoin cash was made available on its cryptocurrency exchange. Starting from Monday, September 23, customers at Luno are now able to store, buy and sell BCH on the platform. The reason given for adding BCH to the exchange is feedback from users in developing markets that convinced Luno to expand their offering from previously just BTC and ETH . Marcus Swanepoel, CEO of Luno, said , “We are in a new and exciting financial era. Developing economies are leading the large-scale adoption and appli...
Post a Comment
Read more

DefiDollar Listing on AscendEX

PRESS RELEASE. AscendEX, formerly BitMax, an industry-leading digital asset trading platform built by Wall Street quant trading veterans, has announced the listing of the DefiDollar Token (DFD) under the pair USDT/DFD on Apr 29 at 1:00 p.m. UTC. DefiDollar is a DeFi lab that aims to bring mass adoption to DeFi with a wide-ranging product suite. The first product offering to go live will be the stablecoin index – DUSD, with ibBTC and optionCoin currently in development. DefiDollar (DUSD) aspires to be a risk-insured stablecoin layer for DeFi. It is designed to provide a safe and stable way for users to hold their assets with DUSD being optimized for peg safety, yield, and diversification. DefiDollar uses DeFi primitives to stay close to the dollar mark. DUSD provides an avenue for diversifying stablecoin holdings to hedge against an event where the underlying stablecoins like Tether or DAI deviate from their peg. DUSD is collateralized by Curve Finance LP tokens. DFD is the n...
Post a Comment
Read more