Share this article

The Governor of the Central Bank, Godwin Emefiele, has confirmed that the Central Bank will continue to pursue unification around its Nafex rate. The NAFEX rate is the forex window where Investors and Exporters transact dollars on market-determined prices.

The CBN Governor said this at an Investors Conference with the Federal Government of Nigeria by CitiBank. The conference which was held online was titled COVID-19: Economic and Budgetary Update.

According to Godwin Emefiele, “We will continue to pursue unification around the NAFEX Market”. The CBN Governor also mentioned that as at December 2019 Nigeria saw a “relatively stable market because the NAFEX rate and rate that the Central Bank does transaction outside the NAFEX was close to themselves.” And that “at some point, the NAFEX rate moved below the Central Bank rate”

Mr. Emefiele also commented on the disparity between the parallel market and the NAFEX rate claiming it is a market for people who are “doing dealings that are not recognized by authorities”

According to Emefiele, ”The CBN has always maintained that the black market is not a good determinant of the value of the naira. You’ll find that people who are in a hurry and do not want to procure the kind of documentation required, will sometimes rush to those markets. But we have used the period of this pandemic to prove that anybody dealing in that market is dealing in an illegal business.”

He also claimed that the COVID-19 pandemic has buttressed claims from the bank that most of the pent-up demand was not realistic. He cited the impact of the global lockdown on flights as a clear example. “These airlines are not flying and sometimes you find dollars being sold through the BDC’s into that market just to be seen that we are doing everything possible to moderate the rate,” Emefiele said.

He further stated that,“airlines are not flying, and people are not traveling so there should therefore not be any demand for forex exchange in that market”.

Insisting that the trades in the black market are counter-intuitive he went further to accuse those trading in the black market as those dealing in corrupt practices. “It could only be those who are dealing in what is simply called corrupt practices that will be dealing in that market and we are not about to talk about unification of our exchange rate around people who are dealing illegally,” Emefiele added.

He also claimed anyone who was willing to deal in forex should utilize the “recognized” NAFEX market which is why “unification will have to be around the NAFEX”

The Federal Government disclosed plans to unify the exchange rate in order to generate more revenue and manage the rate in a sustainable manner. The IMF had previously pointed out that unifying the exchange rate will impact the economy more positively than the multiple exchange rates, which creates a lot of opportunities for arbitrage. The unification also curtails situations where public and private sector decisions are distorted as a result of uncertainties.

The CBN Governor also responded to questions about lack of liquidity in the NAFEX window which averages between $4-60 million daily. In response to how the backlogs will be alleviated, he said that “the external reserve still remains about $36 billion and will imagine it is enough to make somebody do business in Nigeria.”

The CBN also attacked claims about higher dollar demands citing the shutdown of manufacturing in the country as an example. “When somebody comes today to tell us they want to open fresh LC (Letter of Credit) we begin to wonder the motive behind that” he chided. The CBN Governor also claimed maturing obligations will be honored and that “we the CBN stand ready to ensure that where there is shortage of FX in the market where the banks cannot find FX to meet those obligations we will come in to support the market and that we will do from time to time.”

The CBN Governor also tried to calm fray nerves explaining that some of the dollar demands were also from foreign investors and some people who wanted to “front load” their dollar demands, that they do so in an “orderly fashion” and that they will be paid their money claiming Nigeria met all demand for those who were patient in 2016 when Nigeria was in a similar FX crisis.

Nigeria was represented by the following government officials;