Monetary Policy Committee of CBN adopts flexible exchange rate policy for the country that would allow banks retain a small portion of foreign exchange

The Monetary Policy Committee MPC of the Central Bank of Nigeria has adopted a flexible exchange rate policy for the country that would allow banks retain a small portion of foreign exchange for critical transactions. CBN Governor, Godwin Emefiele, disclosed this in Abuja yesterday while addressing newsmen on the outcome of the two-day meeting of MPC.

The governor however ruled out the possibility of the CBN providing foreign exchange to fund the operations of the Bureau De Change under the new foreign exchange rate policy.

CBN Governor, Godwin also said the MPC decided to retain the Monetary Policy Rate at 12 per cent, while also retaining the Cash Reserve Requirement at 22.5 per cent.

The Liquidity Ratio was also retained at the current rate of 30 per cent.

It might interest you to know that the CBN has been under pressure over the last few months to either devalue the Naira or adopt a flexible exchange rate policy.

Meanwhile; Director- General of the Lagos Chambers of Commerce and Industry, Muda Yusuf has commended the Central Bank for adopting a flexible exchange rate regime.  Mr. Yusuf said the flexible exchange rate regime is likely to impact positively on supply, bring about equilibrium into the system and improve liquidity in the foreign exchange market.

He however expressed concern on the critical window being proposed by the CBN to avoid the issue of transparency.

Still on that; some financial experts have commended the Monetary Policy Committee MPC of the CBN for rate retention saying that hike would escalate foreign exchange crisis.

They told newsmen in Lagos that the nation’s foreign exchange problem would escalate with rate hike. The MPC retained the MPC at 12 per cent, while Cash Reserve Requirement CRR and liquidity ratio were also retained at 22.5 per cent and 30 per cent, respectively.

The committee also asked the CBN to work on a flexible exchange rate system, with no mention of devaluation, adding that details of the framework would be released at appropriate time. The MPR is the benchmark interest rate at which the CBN lends to banks to cover their immediate cash shortfalls.

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