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Saturday, June 25, 2022

MPC Retains Policy Parameters to Go After illegal FX Dealers

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The MPC has concluded its two-day policy meeting. At the end of the meeting, members unanimously voted to retain all policy parameters to allow deployed measures to continue to support growth, which it projects at 2.86% YoY for 2021 (vs 3.00% for the federal government).

Other considerations at the meeting included the following:

  1. Plans to put measures in place to limit the potential impact of normalisation of global monetary policy on the domestic economy
  2. Plans to contain fraudulent FX demand and ensure a properly functioning structure for the FX market
  3. The imminent launch of eNaira, which is to take place on October 1, 2021.
  4. The imminent commencement of Infraco, which is targeted at closing infrastructure deficits

MPC reads riot act on fraudulent FX dealings

According to the MPC, Nigeria’s only recognised exchange rate is the investors and exporters (I&E), where legitimate FX demands are met.

The monetary authority also noted that selling FX from the reserves to BDCs is not a global best practice. Therefore, it emphasised that the decision to stop sales to the sector would not be reversed.

The CBN disclosed that it will go after illegal currency dealers, including individuals who illicitly obtain dollars from banks in the guise of having BTA and PTA-related needs.

The apex bank is also investigating AbokiFX, its owner, and complicit companies for allegedly participating in FX manipulation, illegal fixing of USDNGN rates, and economic sabotage.

“All in, while we expect the outcome of the meeting to drive some cautiousness in the FX market, a lot more will have to be done to curtail the widening premium over I&E driven by speculation in the parallel market. We also note the need for increased FX supply to clear existing backlogs of dollar demand and restore relative calm in the market,” analysts at Cardinal Stone Partners said.

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