By Olaitan Ibrahim
The Central Bank of Nigeria (CBN) says it will develop a new set of guidelines and legislation to guide operations in the foreign exchange market for 2024 and 2025.
This is to ensure the proper working of domestic and foreign exchange markets, transparency and harmonisation of rules governing market operations, which it noted as essential.
The CBN mentioned this in its monetary, credit, foreign trade and exchange policy guidelines for fiscal years 2024/2025 released on Tuesday.
The proposed policy trust comes at a time when Nigeria’s foreign exchange market is grappling with significant turbulence with the local currency – the naira, taking a bad hit on the back of devaluation, amid substantial elevated inflationary pressures.
“Hence, new foreign exchange guidelines and legislation will be developed, and extensive consultations will be conducted with banks and foreign exchange market operators before implementing new requirements,” the CBN said in the document.
The apex bank assured that in 2024/2025, its monetary policy will continue to ensure monetary, price and financial system stability.
In pursuance of its objectives, the strategy will refocus on its core mandate by discontinuing direct quasi-fiscal interventionist activities and instead utilise orthodox monetary policy tools for implementing monetary policy.
The bank noted that it will implement an explicit inflation-targeting framework to enhance the effectiveness of monetary policy during the period.
Under the new monetary policy implementation framework, the CBN further said it will provide forward guidance, enhance transparency, and maintain effective communication with the public to anchor expectations and build trust among stakeholders.
To complement the new inflation-targeting environment, the apex bank hopes to continue to monitor the growth in monetary aggregates to ensure consistency with its inflation objective.
“In addition, short-term interest rates will be monitored to avoid volatility to anchor expectations in the financial markets.
Monetary policies in the medium term will aim to foster price stability that promotes sustainable economic growth, stabilise the exchange rate of the naira, and moderate interest rates to facilitate borrowing and investments in the real sector,” it added.
The CBN further noted that it would retain Ways and Means Advances to the Federal Government to finance deficits in its budgetary operations but at a maximum of five percent of the previous year’s actual collected revenue.
The apex bank’s latest position on Ways and Means counters the Senate’s recent increase from five percent to ten percent in an expeditious amendment of the CBN Act in July.
But in the guidelines, the CBN said it will not only retain the advances at five percent, but will also ensure it is liquidated as soon as possible, and that in any event, will be repayable at the end of the year which it was granted.
“Consistent with the banking arrangement of Treasury Single Account (TSA), Ways and Means Advances would now be determined after recognising the sub-accounts of the various MDAs, which are now linked to the Consolidated Revenue Fund (CRF) to arrive at the FGN consolidated cash position. This would continue in the 2024/2025 fiscal years,” it said.