The Central Bank of Nigeria (CBN) has labeled the foreign exchange parallel market as tainted and a channel for bribery and corruption.
CBN Governor Godwin Emefiele took a swipe at analysts who use parallel market figures as the country’s official exchange rate.
Emefiele stated this after the Monetary Policy Committee (MPC) meeting in Abuja on Tuesday.
He said: “For the information of everybody, the parallel market as far as we know, is a shallow market in Nigeria with no more than five per cent of market share. Parallel market, is a tainted market where people who desire to deal in illegal foreign exchange transactions, including sorting of forex, cash-in for purposes of offering bribes, corruption that is the deal.”
Describing as unfortunate remarks by analysts that the exchange rate is ¦ 480/$, the CBN boss said: “The parallel market is a market where people who don’t want to provide documentation to support their transactions deal in and it cannot be the basis to determine the value of our currency, everybody knows and it is accepted that the forex market which is predominantly the I and E window is the market that should be used to determine the exchange rate of our naira.”
He said as far as the CBN is concerned, “today net fx ranges between 380/386/387 and we have been very open about the market price determination factors in that market,” pointing out that CBN has no hand in price determination in that market.
Emefiele said: “The exchange rate is determined by forces of demand and supply in the fx market, we don’t agree that determining factor for exchange rate in Nigeria for our currency should be based on a market that is tainted and where people go to pay any bribe. We are not going to be party to that and we will continue to say this to anyone, or body that cares to listen.”
Emefiele explained that the CBN will be increasing its COVID-19 intervention to N300 billion to accommodate more Nigerians.
He said: ”We have been advised by the MPC that given that this has been very impactful positively, that the CBN should do more, we put 50 billion on the table, we have so far disbursed over N149 billion to 317,000 beneficiaries and we have been told that we have to increase it not just from N149 that it is now but to increase it to almost about N250-N300 billion.”
He said the increase is intended “to accommodate more people that have not accessed this facilities but we do insist that this must be done in a way that it goes round because we found out that some zones are more represented than others.”
On when the country would exit recession, Emefiele said: “We are hopeful and the Minister of Finance addressed a gathering yesterday (Monday) where she said she is hopeful that during the Q1 of 2021 we will exit recession. Based on data available to the MPC from the CBN, we are somewhat optimistic that indeed if we continue doing what we are doing and do more, there is a likelihood that we will see some little positive numbers during the Q4 of 2020, but I can say with some level of certainty, as well that we are so certain that during the Q1 of 2021, we will exit the recession.
“This optimism is fueled by the actions taken by the monetary and fiscal authorities, NBS numbers show that 18 sectors during the Q3 recorded growth during the Q2 and these growth were recorded mainly from the agricultural sector, industry, manufacturing. Indeed, we saw even services doing somewhat slightly but at least agriculture coming up also means what we can achieve from agriculture from whatever we are doing to stimulate agriculture, assuring that manufacturing “will create jobs for our people and also stimulate spending, increase output and ultimately lead to moderation in the level of inflation in our country.”
At the end of year 2020 meeting, the Committee decided by a unanimous vote to retain all parameters by retaining the Monetary Policy Rate (MPR) at 11.5 per cent; the asymmetric corridor of +100/-700 basis points around the MPR; the Cash Reserve Ratio (CRR) at 27.5 per cent; and the Liquidity Ratio at 30 per cent.
The CBN governor said the aggregate domestic credit grew by 7.61 per cent in October 2020 compared with 7.35 per cent in the previous month, as a result of the CBN’s policy on Loan-to-Deposit Ratio (LDR), supported by the Bank’s interventions in the various sectors of the economy.
As a result, “total gross credit by the banking industry stood at N19.54 trillion as at 13th November, 2020 compared with N19.33 trillion at end-August 2020, representing an increase of N290.13 billion.”