The Central Bank of Nigeria (CBN) is to adopt a flexible exchange rate policy as Nigeria’s economic growth continues to decline and the country heads for recession.
The Monetary Policy Committee (MPC) made this known yesterday, claiming it is aimed at restoring the automatic adjustments properties of the exchange rate.
“The foreign exchange market framework is now ready. The MPC voted unanimously to adopt greater flexibility in exchange rate policy to restore the automatic adjustment properties of the exchange rate. Consequently, all nine members voted to hold and introduce greater flexibility in managing the foreign exchange rate,” CBN Governor Godwin Emefiele told journalists at the end of the meeting.
According to him, the MPC “came to the conclusion that although the balance of risks remains tilted against growth; previous decisions need time to crystalise. Consequently, in a period of stagflation (price rising continuously without corresponding increase in jobs), the policy options are very limited. To avoid complicating the conditions, the Committee decided on the least risky option to hold.”
Emefiele said the least risky option is the adoption of a flexible foreign exchange rate. However, the CBN “would retain a small window for funding critical transactions. Details of operation of the market would be released by the CBN in a few days time”.