CBN may review exchange rate

In from Ali Smart …

The Central Bank of Nigeria (CBN) is likely to announce a new exchange rate and other fiscal policy regime at the end of the Monetary Policy Committee (MPC) meeting today, Ripples has learnt.

The MPC has responsibility within the CBN to formulate monetary and credit policy for the country.

The MPC meeting which holds bimonthly was initially billed for Monday and Tuesday but had to be postponed due to the Eid Fitri holiday.

Ripples gathered that top on the agenda at the 245th meeting is the need to strengthen the naira, which has been under intense pressure at the parallel market in the past few weeks.

The MPC, which has operational independence in determining monetary policy, will be meeting for the fourth time this year. The naira, which sells for N196.95 to a dollar on the interbank market, goes for about N240 to a dollar at parallel market points across major cities in the country.

The pressure faced by the naira at the parallel market was provoked by the CBN’s restriction of importers of 41 products from accessing forex at the official foreign exchange market.

Read also: No cause for alarm, CBN says of falling naira

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The depreciation of the naira had heightened the debate on the devaluation of the currency. While the CBN has maintained that its decision not to undertake a further devaluation of the naira was as a result of the need to safeguard the Nigerian economy from the shocks and negative impact this would have on the economy, some analysts and agencies have intensified their call for the devaluation of the nation’s currency.

Nigeria’s consumer price index, the basket used in gauging inflation rate, increased to 9.2 per cent at the end of June.

Over the years, the objectives of monetary policy have remained the attainment of internal and external balance of payments.

The outlook for inflation is that the economy may experience a gradual rise in consumer prices but within single-digit target in the first half of 2015, due to increased spending in the run up to the 2015 general elections; depletion of the external reserves fuelling depreciation of the naira and its impact on food prices.

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