World Bank demands exchange rate adjustment by CBN
June 26 (THEWILL) – The World Bank has requested an adjustment to the Investors & Exporters (I&E) window exchange rate in Nigeria, saying the rise in the price of oil has presented the Central Bank of Nigeria (CBN) to take a exam .
According to the World Bank, it is necessary to adjust the current rate to reflect market dynamics. Prime Business Africa reported earlier in the day that the naira traded at 421.33 naira to $1 in the I&E window, while a dollar was sold at 606 naira in the parallel market on Monday.
Given the current rate and the growing demand for dollars, an adjustment is likely to drive up the cost of exchanging US currency to naira, further weakening Nigerian legal tender in all foreign exchange markets.
The World Bank made this suggestion in its report titled “Nigeria Development Update (June 2022): The Continuing Urgency of Unusual Cases”. The international creditor warns that if its advice is followed, the CBN should implement the adjustment gradually.
The statement reads: “Favorable external conditions (oil prices being the highest in nine years) provide the opportunity to adjust the exchange rate according to market dynamics. Allowing further gradual adjustment to the IEFX rate, where the CBN manages the price, would help eliminate the misalignment and alleviate lingering exchange pressures.
Recall that the global financial institution had criticized the monetary policies of the central bank, saying that the CBN weakens Nigeria’s revenue mobilization, foreign investment and the business environment in general.
In its continued condemnation of CBN policies under Godwin Emefiele, the World Bank said the financial regulator said it had unified multiple trading channels, after the apex bank adopted the I&E window as its official forex market (leaving black market side), it still funds about four exchange markets to control forex movements.
“The CBN has taken steps to unify several exchange rates by adopting the IEFX window rate as the official exchange rate in May 2021. However, different windows still exist and the parallel rate premium continues to climb, reaching 39% compared to at the official IEFX rate in March 2022.” The World Bank wrote.
The channels are the I&E window, the secondary market intervention retail window, the SME window, as well as the window for invisibles. The CBN would provide currencies at different rates to participants in different foreign exchange markets.
In its statement to the Nigerian central bank, the World Bank said that “the benefits of more effective management of the exchange rate, towards a unified and market-reflecting exchange rate, outweigh the years previous”.