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Lagos — CENTRAL Bank Governor, Professor Chukwuma Soludo has said that the present control instituted by the apex bank on foreign exchange is temporary and would be lifted as soon as the situation in the forex market improves, just as the apex bank sold $326 million at its bi-weekly foreign exchange auction on Wednesday at N145.50 to the dollar.
There was no trading on the inter-bank market for the third day.
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Speaking to journalists yesterday, Soludo said that foreign exchange controls, which have shut down the country's inter-bank foreign exchange market, were only a temporary measure.
The amount sold by the Central Bank was more than the $200 million it had initially offered, but below
CENTRAL Bank Governor, Professor Chukwuma Soludo
demand of $420 million. Traders on the open market said the dollar was selling for around N155.
The apex bank announced on Tuesday that it was banning the use of forex purchases for anything other than eligible transactions, saying they were not to be used on the interbank market, in an effort to stabilise the naira.
"The very first thing that you have to understand about the policy is that it's a temporary measure," Soludo said.
"It may be weeks, it may be months, but I can not see it lasting much longer."
The policy is meant to stabilise the naira after it lost more than 20 per cent of its value against the U.S. dollar over the past two months as the global economic downturn erodes the nation foreign exchange earnings from oil export.
Dealers on the interbank market, who have not traded since the announcement, said efforts were underway to convince the regulator to reverse the decision, which they fear will create a massive parallel market on which the naira could fall sharply.
In a circular to all commercial banks and authorised dealers in foreign exchange, the CBN said: "The Monetary Policy Committee (MPC) of the Central Bank of Nigeria met and among other things, reviewed the developments in the domestic foreign exchange market.
It noted the success of the measures introduced in January, 2009, especially in respect of the re-introduction of the Retail Dutch Auction System (RDAS) and the subsequent moderation in the exchange rate.
"However, in order to strengthen the effectiveness of the RDAS as well as anchor expectations and further stabilise the exchange rate, the CBN wishes to communicate the following information and guidelines for your noting and full compliance that:
•The Central Bank of Nigeria is committed to managing the exchange rate within a band of + 3 per cent until further notice;
•The foreign exchange Net Open Position of banks shall be one per cent of Shareholders' funds with effect from Wednesday, February 11, 2009;
•All purchases of foreign exchange by Authorized Dealers whether from the CBN window or from other sources shall be for the use of customers and shall not be used for inter-bank transactions.
Any such funds purchased by Authorised Dealers and which is not sold to customers for eligible transactions within five working days should be surrendered to the CBN for repurchase at the latter's buying rate; iv) The price at which the CBN stands ready to buy foreign exchange shall be at no more than one per cent below its immediate past selling price at the RDAS;
•The buying and selling rates by Authorised Dealers shall not be more than one per cent around the CBN rates.
The buying and selling rates by the Bureaux de Change shall not be more than two per cent around the CBN rates.

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