Nigeria’s central bank Governor Godwin Emefiele said he is committed to a currency regime that sent foreign investors fleeing from the nation’s markets and exacerbated a dollar shortage.

The Central Bank of Nigeria won’t allow “faceless and criminally minded people to destroy the currency under the guise of a free float as is being canvassed,’’ Emefiele said in a speech on Saturday in Abuja, the capital, while accepting an award from a local newspaper. Independent estimates and “purchasing power parity analysis” by the regulator showed that the currency shouldn’t be so low on the unofficial market, which has been influenced by “criminal activities,” he said.

Speculation that Nigeria would allow the currency to drop became widespread after the Abuja-based central bank eased some capital controls last month, increased sales of dollars and weakened the exchange rate for people paying overseas medical and school bills. While Emefiele abandoned the currency’s peg of 197-199 to the greenback in June, it has been stuck between 305 and 317 on the official market since August even as the black-market rate tumbled to 500

The West African nation imposed tighter foreign-currency controls from late 2014 to protect the naira and reserves as oil prices plunged. Importers of 41 goods the government has deemed non-essential or said should be processed locally, including textiles and rice, have been barred from accessing the official foreign-exchange market, forcing them to buy dollars on the black market.

The naira fell to a record 520 per dollar in unofficial trading last month before strengthening to 460 this week, 32 percent weaker than the official rate. Forward contracts suggest the currency will probably depreciate. Six-month forward contracts fell 0.2 percent to 376.19 per dollar by 3:57 p.m. in Lagos.

The central bank will probably want to narrow the naira’s black-market spread and boost its reserves further before liberalizing the foreign-exchange regime, Razia Khan, head of Africa research at Standard Chartered Plc, said in a note to clients. Any such move may also require a removal of Nigeria’s price cap on gasoline, most of which it imports, she said.

Emefiele also said:

Inflows into Nigeria have declined to less than $700 million per month from $3.6 billion in June 2014, while demand for foreign currency is about $4.8 billion
The central bank will “continue to meet all legitimate transaction-based foreign exchange demands in the market”

While the ban on the 41 items wasn’t “cast in stone,” calls for a reversal now were wrong given the “new realities of nationalist and populist sentiments sweeping across the world,” including Brexit and the election of Donald Trump as U.S. president

“I have heard commentators suggest we should follow Egypt’s example and free the naira. What they do not tell you is that following their currency adjustments, inflation today in Egypt is over 30 percent. Is that what we want in Nigeria?”

President Muhammadu Buhari, who has backed Emefiele’s stance on the naira, may reshuffle his cabinet this week and make changes to senior central bank personnel, Lagos-based Punch newspaper reported Sunday, citing an official it didn’t name. Buhari, 74, resumed work on Monday after spending seven weeks in the U.K. getting tests for an undisclosed ailment.

Source: https://www.bloomberg.com/news/articles/2017-03-13/nigeria-lays-naira-float-to-bed-and-attacks-currency-criminals?cmpid=flipboard

God bless The CBN governor
Long live The President and C-in-C
Long live The Fed Rep of Nigeria

It's official the CBN has sealed fates on free floating currency issue. These guys are simply too out of touch to realize the currency is over valued. The market knows better than a few guys at Abuja. Let them keep defending it currency til they cant.

Independent estimates and “purchasing power parity analysis” by the regulator showed that the currency shouldn’t be so low on the unofficial market, which has been influenced by “criminal activities,” he said.

Doesn't matter what u think markets are based off of confidence.

Importers of 41 goods the government has deemed non-essential or said should be processed locally, including textiles and rice, have been barred from accessing the official foreign-exchange market, forcing them to buy dollars on the black market.

I guess people should stop acting shocked when they see higher prices for goods consistently on CPI. Most don't even pay attention to the report. Alot more can't connect it to previous policies.

“I have heard commentators suggest we should follow Egypt’s example and free the naira. What they do not tell you is that following their currency adjustments, inflation today in Egypt is over 30 percent. Is that what we want in Nigeria?”

Dont neglect fact bank deposits are growing and remittances have jumped a fifth year-on-year in the three months after devaluation. Egyptian stocks and bonds - investor favorites before the 2011 Arab Spring - are luring buyers again.

It would make it currency clear dollar backlog, increase foreign investment into country, speed up state government projects and kill black market.

In just over 3 weeks, the CBN appears to have spent over $500 million dollars going to war with the so called speculators.

The question is, does the CBN have the appetite & a dollar war chest deep enough to sustain a long war of attrition with the black marketeers?

I doubt it.

It is not easy to defeat the market in this situation.

The question is why haven't they done this since the dollar was around 200?
The guy above me asked the right question. And by my count the CBN has injected not less than $700m just stabilize the Naira. I want to believe they know what they are doing, but to it seems unsustainable and and wasteful.

Reports out last week indicate that US shale oil production is rebounding vigorously.

This will put further downward pressure on the price of crude, as we saw last week when the price fell below $50 per barrel for the first time in a few months.

If Opec producers, particularly Saudi Arabia decide to increase their production in order to defend their market share, oil price could easily tumble to below $45 .

This will reduce Nigeria's earnings and give the foreign currency sharks the upper hand as against the CBN, as far as Naira value is concerned.

What an incredibly stupid policy! As several commenters have already noted, it is completely unsustainable, and this would be true even if Nigeria's foreign reserves were twice their actual size: China has spent over $1 trillion in a similar attempt to defend the Yuan.

As long as Emefiele is in office, and keeping to this ridiculous policy in a bid to pander to Buhari's economic ignorance, FDI inflows will never recover, and the Naira will continue to face sustained downward pressure - the very opposite of what this wrong-headed policy is intended to achieve.

989900:
I Don't get the fuss y'all yelling about.

Read the other post on this and get to speed. You'll see the article CBN was talking about.

https://www.nairaland.com/3669137/egypts-pound-shows-nigeria-must