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CBN concerns about dollar supply more than naira valuation

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The Central Bank of Nigeria (CBN) has said that it is worried more about increasing dollar supply on the forex market and not valuation of the local currency, its director of monetary policy Hassan Mahmud said on Tuesday.

“We are not really bothered much about valuation,” Mahmud told a virtual investor conference, according to Reuters report.

“What we are worried about is the supply side and the confidence in the system.”

Mahmud added that the level of the currency is expected to adjust based on demand but that market failure had made the bank adopt a managed float regime.

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The naira traded stable at N530 to the dollar on the parallel market on Tuesday and was quoted N410.67 per dollar on the Investors and Exporters (I&E) forex window on Tuesday as against the last close of N411.13.

The regulatory bank had sustained its policy to manage the supply side of the dolllar in view of the dwidling forex inflow, leading to dollar shortage in the market.

At the last Monetary Policy Committee Meeting (MPC), the CBN suspended dollar sales to the Bureau de change operators after the local currency was sold close to N500 to the dollar on the black market.

The CBN has also increase dollar supply to banks in a bid to meet demand for travel allowances, medical and schools fees, but this has yet to impact the market considerably.

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