Naira Decline: CBN Cracks Down On Speculators, Implements Restrictions On Diaspora Remittances

Following the recent decline of the Nigerian naira at the parallel market, the Central Bank of Nigeria (CBN) has initiated foreign exchange intervention measures targeting currency speculators.

Folashodun Shonubi, Acting Governor of the CBN, revealed this development to State House correspondents at the Presidential Villa after briefing President Bola Tinubu on the bank’s efforts to halt the naira’s slide.

Shonubi highlighted that the volatility of the naira in the parallel market is driven not solely by economic factors but also by speculative demand. Although he refrained from divulging specific intervention details, he cautioned speculators that the proposed measures could lead to significant losses for them.

The primary aim of Shonubi’s presence at the Presidential Villa was to reassure President Tinubu that the CBN was taking decisive action to address concerns. He expressed confidence that the implemented measures would yield positive outcomes in a matter of days.

Shonubi emphasized that the CBN’s ultimate goal is to establish an efficient and reasonable operating environment that minimizes adverse impacts on the average Nigerian’s life.

Shonubi stated, “Mr. President is very concerned about some of the developments in the foreign exchange market. One of the things we discussed is what could be done to stabilize and improve the liquidity in the market and also the goings-on in various other markets, including the parallel market.”

He added, “He’s concerned about its impact on the average person, since many activities that we do, which are purely local, are still referenced to exchange rates in the parallel market.”

Shonubi further disclosed that the CBN had begun implementing measures to reduce pressure on the naira in the parallel market.

Meanwhile, the CBN issued a circular to authorized dealers, international money transfer operators, and the general public, placing limits on the exchange rate for naira payout of Diaspora remittances.

The circular was signed by the Director, Trade and Exchange Department, CBN, Ozoemena Nnaji.

In the circular dated August 9, 2023, the CBN placed limits on the exchange rate for naira payout of Diaspora remittances.

The CBN directed that the naira payment option for proceeds of Diaspora remittances should be made within a limit of -2.5 per cent to +2.5 per cent of the previous day’s average rate on the Investors’ and Exporters’ window.

The circular read, “Further to the circular referenced TED/FEM/PUB/FPC/001/004 dated July 10, 2023 and the meetings held with all banks and IMTOS, the Central Bank of Nigeria hereby announces an allowable limit of -2.5% to +2.5% of the Investors’ and Exporters’ window average rate of the previous day as the anchor rate for the naira payout option.

“Accordingly, all banks and International Money Transfer Operators are required to adhere to the stipulated limits. Please note and ensure strict compliance.”

Shonubi had last week said the diversion of Diaspora remittances to the parallel market was putting pressure on the local currency.

At the end of the last Monetary Policy Committee meeting, the acting CBN governor said the apex bank was working towards making the forex market more efficient and effective in the face of high demand for dollars.

Regarding the CBN’s responsibility in the market, Shonubi said, “The role of the central bank is to intervene and keep the market at a fairly stable level.”

With the arbitrage gap between the I&E Fx window and the parallel market widening to about N100 due to foreign exchange shortage shortage, the Economic Intelligence Unit recently predicted that the CBN will revert to “heavier management of the exchange rate in late 2023 to tame rapid price rises.