Senate Considers Bill to Reverse Naira Free Float

• Senate Considers Bill to Reverse Naira Free Float

The Senate is proposing a new currency law that will give the Central Bank of Nigeria legal powers to set exchange rates, effectively rolling back the nation’s six-month-old free float.

The bill, sponsored by Senator John Enoh, is meant to repeal the existing foreign-exchange legislation, under which market rates are “mutually agreed” between counterparties, and allow the CBN to decide those rates.

The draft has been through two readings in the Senate and will be put to a public hearing next year, according to Enoh, who is representing Cross River Central Senatorial District.

“The [central] bank may determine the basic exchange rate, rate of purchase and sale of foreign exchange and arbitrated exchange rate in foreign exchange transactions, if it is necessary to do so for harmonious and orderly foreign exchange transactions in Nigeria,” according to a copy of the proposed law seen by Bloomberg.

“Residents and non-residents shall perform transactions in conformity with such basic exchange rate,” it added.

If passed, the legislation will give the central bank freedom to defend the naira, which has tumbled 37 per cent against the dollar since the CBN Governor, Mr. Godwin Emefiele, abandoned its peg in June.

According to analysts, the central bank is still intervening to stop it weakening, with foreign-currency reserves dropping to an 11-year low in October.

The black-market exchange rate has collapsed to a record 485 as dollar shortages mount in the country.

The proposed law is separate from a draft amendment to existing legislation published last month by the Nigerian Law Reform Commission, an independent body.

It proposed jailing people holding dollars in cash for more than 30 days and restricting capital outflows.

The naira weakened for a second day on Monday, depreciating 0.3 per cent against the dollar to 317.13, the lowest since October on a closing basis.