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Naira
crash: CBN begins forex market intervention
The Central Bank of Nigeria has rolled out an action plan aimed at shoring
up and stabilising the naira exchange rate and reining in the divergence
between the official and parallel markets. The plan is coming on the heels of predictions that the naira exchange rate soon would hit a low of N200 per dollar if the regulators fail to address the widening gap between the official and black market forex rates. The plan, according to a statement by the apex bank on Wednesday, will take off today. The CBN said it would begin to intervene by selling cash to the registered Bureaux de Change of the deposit money banks. “Only banks with large branch network would be engaged for this purpose at the initial stage,” it said. Listing other special foreign exchnage intervention measures, the CBN said foreign exchange in cash would, henceforth, be made available at all CBN branches for ease of accessibility by the authorised dealer banks. According to the apex bank, “The banks shall purchase forex cash by submitting bids and their BDCs shall sell at no more than two per cent above the CBN rate.” “Each bank’s BDC shall be entitled to purchase a maximum of $5m per week and funds from the CBN shall not be re-sold except to end users subject to laid out guidelines.” The apex bank listed eligible transactions and documentation requirements and limits to include Business Travel Allowance “subject to letter of request from the corporate body, international passport, air ticket, endorsement of passport by BDC stating the amount sold and a limit of $5,000 per quarter.” The CBN listed other guidelines to include Personal Travel Allowance maximum limit of $4,000 per quarter; and school fees abroad for university and high schools, subject to school bill, admission letter and a maximum of $10,000. Others are, medical bill abroad, subject to a referral letter from a specialist hospital and a maximum of $10,000 per case; and credit card payment, subject to a limit of $5,000 per quarter. The mortgage monthly payment abroad, subject to duly executed assignment, demand note/invoice is a maximum limit of $5,000 per annum, while utility bills, subject to documentary evidence, is a maximum of $5,000, according to the bank. The naira has been under attack by speculators following a 30 per cent plunge in a few days in December. It now trades at N180 per dollar in the parallel market, down from N118 in November 2008. The official price has, however, remained stable at about N145 per dollar.
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