CBN to stop selling currencies to banks by end of 2022, days after IMF told it to ditch exchange rate

  • The Central Bank of Nigeria has announced its intention to stop selling foreign exchange to commercial banks by the end of the year
  • This comes seven months after it took a similar action against Bureau de Change operators which caused the Naira to fall to as low as N600 per dollar.
  • The international monetary fund had a few days ago asked the CBN to abandon the use of the official exchange rate for a transaction

The Central Bank of Nigeria (CBN) has indicated that it will cease selling foreign exchange to depository banks (DMBs) by the end of the year.

This is as the apex bank said banks need to start sourcing foreign currency from export earnings hence the need to support the non-oil sector of the economy, Channels Tv reports.

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CBN Governor Godwin Emefiele made this known at the end of the 364th Bankers Committee meeting on Thursday, February 10, 2022.

CBN to stop selling currencies to banks by end of 2022, days after IMF told it to ditch exchange rate
CBN Governor Godwin Emefiele Credit: CBN
Source: Facebook

The meeting was also designed for the launch of the CBN’s new currency repatriation program, the “RT200 FX Program”.

What is the RT200 FX program?

The RT200 FX Program, which stands for “Race Towards US$200 Billion in Foreign Exchange Repatriation”, is a set of policies, plans and programs for non-oil exports that will enable Nigeria to achieve an ambitious but achievable goal of 200 billion US dollars in currency repatriation. , coming exclusively from non-oil exports, over the next 3 to 5 years.

Emefiele on selling dollars to commercial banks

According to the CBN Governor, it no longer makes sense for banks to always rush to it for dollars to meet demands when they can generate their own from export earnings.

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He said:

“The era is coming to an end where because your clients need $100 million in currency or $200 million, now you want to wrap up all the dollars and pass them to CBN to give you dollars.”

“It ends before or by the end of this year. We will tell them not to come to the Central Bank anymore to get foreign exchange and generate their export earnings.”

“When those export earnings come in, we’ll finance them at 5% for you and they’ll earn a rebate. Then you can sell those profits to your customers who want $100 million. But to say that you will continue to come to the Central Bank to give you dollars, we will stop that.

“Nigeria cannot continue to depend on foreign exchange earnings to fund its import obligations from revenues derived from commodity revenues for which we cannot determine both price and quantity”

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As news of the latest action spread, black market dealers wasted no time in weakening the naira to 580 naira to the dollar on Thursday night.

N580 per dollar on the black market is the lowest since the CBN stopped selling dollars to BDC traders reports.

IMF calls on Nigeria to abandon its official exchange rate

Legit.ng had previously reported that the International Monetary Fund was asking Nigeria to abandon the official exchange rate.

According to the IMF, the use of the official exchange rate harms the economy of Nigeria and has asked the CBN will review its policies.

The IMF has also called on the Nigerian government to remove fuel subsidies and use the funds to build infrastructure.

Source: Legit.ng