The CBN Governor, Mr. Godwin Emefiele, disclosed this on Tuesday while addressing journalists shortly after the two-day MPC meeting held at the apex bank’s headquarters in Abuja.
He said with the directive, the bank would soon release a new guideline on the management of foreign exchange in the country, adding that it would retain a small window for critical transactions.
The governor gave some of such transactions as importation of vital machineries for production as well as essential basic raw materials critical for manufacturing, which, by their nature, could not be sourced locally.
A flexible exchange rate system is a monetary system that allows the exchange rate to be determined by supply and demand.
The implication of this is that with a high demand for the dollar in Nigeria, there is every likelihood that the naira will experience a further decline in the coming months.
The CBN had been under pressure over the last few months to either devalue the naira or adopt a flexible exchange rate policy.
Emefiele said following the recent decrease of the country’s foreign exchange reserves, the time had come for the bank to introduce greater flexibility in the management of forex.
He said all the members of the committee voted unanimously to introduce greater flexibility in the inter-bank forex market structure and to retain a small window for critical transactions.
According to him, while the country awaits the new policy to be unveiled soon, the CBN will only fund critical transactions as the apex bank does not have enough foreign exchange to meet all the demand by users.
He added that those who desired foreign exchange should seek for it from autonomous sources.
The governor also ruled out the possibility of the CBN providing foreign exchange to fund the operations of Bureau De Change operators under the new policy.
He recalled that the committee had in its last two consecutive meetings signalled the imperative of the reforms that needed to be carried out in the foreign exchange market.
Meanwhile, the naira weakened slightly in the parallel market on Tuesday following the MPC decision.
The currency closed at 346 to the dollar on the parallel market, weaker from 345 at Monday’s close.
At the official interbank window, commercial lenders were quoting 199 naira to the dollar, close to its peg of 197.
Also, the external reserves fell by 2.7 per cent to $26.56bn as of Monday from a month earlier, according to the CBN data.
The external reserves have lost over $2bn this year and were down by 10.7 per cent a year ago when they stood at $29.77bn.
Punch
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