- There are indications that the CBN will pump more dollars into the market to stabilize the exchange rate
- A source said the move will be desirable as such a policy is what is needed at this time
- He said there is a need to tackle FX shortage from both the demand and supply sides.
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Plans have been finalised by the Central Bank of Nigeria (CBN) to stop the naira's relentless decline against the dollar. According to a source, one of these plans is to flood the market with dollars.
This is coming after an earlier report by Legit.ng that the CBN has assured that some steps will be taken to stabilise the naira's value relative to the dollar.
Folasodun Sonubi, the Acting CBN Governor disclosed this to reporters after he had briefed President Bola Tinubu on Monday at the State House on the bank's efforts to stop the slide.
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Meanwhile, the CBN board member who spoke to The Nation under anonymity, said at this point, the bank is going to inject foreign exchange into the market to stabilise the exchange rate.
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Reserve will help stabilise Naira
The move, according to the source, will be a good idea because it will stabilise the naira at all times, which is the purpose of maintaining reserves.
He mentioned that the CBN had previously intervened by injecting funds into the foreign exchange market as needed, adding that the choice is a routine management task.
He claimed that in order to prevent the naira from further depreciating, it is best to flood the market with foreign currency.
I am sure this government did not want any demand management policy, but such policies are also called for at this point. If they are operating a free market, the demand is overwhelming and you need to manage that demand, restrict that demand with certain policies.
Foreign exchange availability is very limited, so the problem requires to be tackled from both the demand and supply sides.
Notably, Nigeria's central bank abolished the country's multiple exchange rate system and effectively floated the naira currency.
Reports also indicates that despite the naira float, Naira continues to record loss at the black market as disparity between official and black market widens.
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