- Exchange Rate: CBN to Defend Naira
The Central Bank of Nigeria (CBN) will continue to defend the Naira against the widely publicised floatation.
Earlier this week, a few media had misinterpreted a possible technology glitch on the CBN website as a move by the apex bank to finally free float the local currency.
Nairametrics had reported that the Naira value will henceforth be determined by market forces, while the Guardian said the CBN may soon allow the local currency to find its value against the current forex policy.
The apex bank, during a Consultative Roundtable with the CBN Governor title:‘Going for Growth’, said the central bank would be disobeying the law by free floating the Naira.
CBN Governor, Godwin Emefiele, said he is committed to protecting the Naira value.
“I am committed to protecting the naira. We cannot allow the naira to float freely,” he said.
He said it would be difficult to maintain low-interest rate, stable exchange rate, healthy foreign reserves, low inflationary environment and improve new job creation with a weak Naira and high inflation rate.
He said: “In fact, I love these and would have less stress in monetary policy if all these are possible. But the question we should ask ourselves at this session is, in the Nigeria of today, are these all possible at the same time?
“Put succinctly, we have watched some so-called economic and financial analysts through televisions and others through the newspapers say that ‘to grow the economy and create jobs, the CBN must allow exchange rate to free float, and also allow inflation to rise; while at the same time allowing interest rates to come down.’
“We have also curiously observed that these analysts have often reached different conclusions from those of the CBN. Again, I am not surprised at these views because most have done so with shockingly limited or outright incorrect information.
“For example, we have watched some armchair analysts demand that the CBN stop ‘defending’ the Naira and simply allow market forces to determine the exchange rate. These analysts simply call for the Naira to be floated. To these analysts, let me remind them that the CBN Act demands that we ‘defend’ the Naira using the foreign exchange reserves. In setting out the five principal mandates of the CBN, Section 2, Subsection C of the CBN Act 2007 reads and I quote “…maintain external reserves to safeguard the international value of the legal tender currency”.
“In effect, the CBN would be disobeying the law establishing it, if it sits idly by and allows the Naira to be determined wholly by the so-called market forces.”