By NIYI JACOBS
It’s been more than a month since the Central Bank of Nigeria (CBN) floated the naira.
The development makes buyers and sellers of foreign currency in the official FX market to now quote rates they find comfortable in the FX market, as against previous practice where rates were dictated by the Central Bank of Nigeria (CBN).
“Given that this new rate in the official market is the same as the parallel market, there is no incentive for people and businesses with genuine transactions to patronize the parallel market, hence FX trading activity in the parallel market will slow down significantly,” Abiola Rasaq, an economist and former head of investor relations at United Bank for Africa.
Meanwhile, it would be noted for some time now, the apex bank has now removed the foreign exchange rate from the landing page of its website
But last week Monday, the apex bank updated its website to announce the upcoming Monetary Policy Committee meeting scheduled for this week. It will be the first meeting without Godwin Emefiele, the suspended CBN governor.
In line with that update, the bank also updated the foreign exchange rates but removed the details from the landing page. While you can still see the rates, if you look for them, it is no longer business as usual, where you see them without deliberately looking for them.
Happening With In a Month
The banks are however having a good half year, thanks to the month of June and the float of the naira. For the first time ever, Zenith Bank crossed the N1 trillion mark as its share price rose by over 3% after the devaluation to trade at N32 per share. The share price went as high as N35.25 in early July, before cooling down to about N34 on Tuesday morning.
Guaranty Trust Bank (GTCo) also crossed the N1 trillion Market cap when its share price crossed the N34 mark to sell as high as N36.70 per share. While UBA is far from the N1 trillion mark, the bank has gained more than 100 billion in market cap since the naira float. Most of the big banks have recorded similar gains.
While banks with dollar exposure (in debt or other liabilities) may have a hard time, they generally seem to be in a better place, thanks to the local currency float.
Also on the list of gainers are states and state governors. States have shared as high as N1.1 trillion in FAAC payments in the month following the float. In June, they shared N786 billion as the Federation Account Allocation Committee (FAAC) adopted N436.38/$ at the June meeting to the dismay of many governors. For July, the case will be different and the governors will supervise a huge payout.
It would be worthy to note that you can now pay as much as $500 for foreign goods and services using your naira card? For many Nigerians, that is a win. People just wanted the ability to pay for Google services, Netflix, YouTube, Apple, Spotify, and Amazon Prime subscriptions using their naira card. That is back now, and we will take that as a win, even if we have to pay more.
Account Holders to Deposit Freely
Furthermore, the Central Bank of Nigeria lifted the limits placed on domiciliary accounts.
In a statement by the CBN, the new regulation allowed account holders to deposit freely, have unrestricted access to funds in accounts, and make up to $10,000 withdrawals daily.
The statement was titled ‘CBN issues further guidance on operational changes to foreign exchange market’.
It read in part, “Ordinary domiciliary account holders shall have unfettered and unrestricted access to funds in their accounts. Domiciliary account holders are permitted to utilise cash deposits not exceeding $ 10,000 per day or its equivalent via telegraphic transfer.
“DMBs shall provide returns to the CBN, including the ‘purpose’ for such transactions.
Renewed Hope with Hike In Interest Rate
The Monetary Policy Committee of the Central Bank of Nigeria (CBN) has raised the monetary policy rate (MPR), which benchmarks interest rates, from 18.5 percent to 18.75 percent.
CBN’s decision is the first monetary policy decision made by the committee since the Bola Tinubu administration took office on May 29, 2023.
While other monetary policy decisions, such as the naira float, had been taken by the bank since the new government came on board, this is the first interest rate decision meeting by the apex bank since Tinubu took office as president.
Folashodun Shonubi, acting governor of the apex bank, announced the development to journalists on Tuesday after the committee’s meeting at the CBN headquarters in Abuja.
This is also the first monetary policy committee (MPC) meeting since the suspension of Godwin Emefiele as CBN governor.
Last week, Nigeria’s inflation rate rose to 22.79 percent amid the increase in food prices.
The monetary policy rate (MPR) is the baseline interest rate in an economy, every other interest rate used within an economy is built on it.
Tinubu had promised in his campaign and also in his inauguration speech to reduce interest rates, but the bank has stayed on the pre-Tinubu policy course to increase interest rates in order to curb inflation.
Speaking at the media briefing, Shonubi said the committee members voted to hike the rate by 25 basis points to 18.75 percent, adjust the asymmetric corridor to +100 and -300 basis points around the MPR, retain the cash reserve ratio (CRR) at 32.5 percent and liquidity ratio at 30 percent.
He said the moderate rate hike is to sustain efforts at anchoring inflation expectations, narrow the negative real interest rate gap and improve investor confidence.
Shonubi also said members agreed unanimously that the previous rate hikes have been effective in moderating the rate of price increases.