07 November 2014, Abuja – Determined to stem the continued decline in the nation’s external reserves, the Central Bank of Nigeria, CBN, yesterday excluded importation of generators and some items from purchase of foreign exchange from the official foreign exchange market.
Meanwhile, the naira suffered its biggest daily depreciation in the interbank market yesterday, losing 285 kobo to the dollar.
Recall that the CBN Governor, Mr. Godwin Emefiele had two weeks ago promised that the CBN would soon introduce measures to protect the economy and the Naira from declining crude oil prices.
He said, “I am aware that price of crude oil is dropping and that presents some form of vulnerability to Nigeria. I can assure you that fiscal authorities and monetary authorities are taking actions to ensure that we take steps that will help Nigeria withstand the shocks that we see. A number of actions will be unveiled, in fact some have already been unveiled, and more will be unveiled by both the monetary and fiscal authorities to ensure that Nigeria continues to remain strong, healthy to be able to support growth and development in Nigeria.”
The following week, the CBN moved to protect banks from possible naira depreciation, by imposing restrictions on the amount of foreign loans they can borrow.
The CBN limited foreign currency borrowing of banks to 75 percent of the shareholders’ funds. Thereafter, the CBN banned banks from selling intervention foreign exchange in the interbank or to bureaux de change (BDCs).
Specifically, the CBN excluded importation of electronics, finished products, information technology, generators, telecommunication equipment and invisible transactions.
The implication is that importation of these items would not be funded with foreign exchange purchased from the bi-weekly Retail Dutch Auction System (RDAS) sessions conducted by the CBN.
This development was contained in a circular signed by the Director of Trade and Exchange Department, CBN, Mr. O.I Gbadamosi. The circular was titled, “Exclusion of some transactions from the RDAS window.
The circular stated, “This is to inform all authorised dealers and the general public that in order to maintain the existing stability in the foreign exchange market and to further strengthen the various policy measures already initiated by the Central Bank of Nigeria, the importation of the following items shall henceforth be funded from the interbank foreign exchange market only: Electronics, finished products, information technology, generators, telecommunication equipment and invisible transactions.”
– Vanguard
