Analysts Foresee Possible Flexibility in Exchange Rate

Analysts have projected a possible flexibility of exchange rate flexibility in the nearest future as the personal statements from the 12 members of the Monetary Policy Committee, MPC, of the Central Bank of Nigeria from their last meeting in Abuja revealed more differences than usual.

One member of the MPC, Chibuike Uche questioned the gain of the CBN policy which restricted importers of 41 items from accessing official foreign-exchange markets.

According to him, it would be better if the Federal Government officially ban such products out rightly.

He said: “Until legal opinion is sought on my above concern, a more immediate concern is the need for the CBN to, as much as possible, reduce the information asymmetry associated with running a discretionary foreign exchange management system.

The CBN on June 23, 2015 had excluded importers of 41 selected goods and services from accessing foreign exchange at the Nigerian foreign exchange markets.

Following the different views of members of the committee, analysts said they believe there would be a subtle change in thinking on exchange rate policy.

Four members of the MPC also raised the possibility of widening the band, which one terms “guided” flexibility.

One notes that a currency substitution index has soared above the 30 per cent international threshold.

The MPC members attributed the pick-up in headline inflation to factors over which monetary policy has little influence, including fuel shortages and religious festivities.

While four of the 12 members voted for a policy rate rise, the intervening weeks have seen another month of inflation above the range and fresh global turbulence emanating from China.

To this end, the MPC is expected to announce a hike later in September.

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