The reign of Godwin Emefiele as CBN Governor will perhaps go down in history as one of the most tumultuous and controversial ever. He has presided over a period where Nigeria has faced its worst economic crisis ever and has faced the wrath of most Nigerian and foreign investors for his handling of the forex crisis.
By February, 2017 the exchange rate had hit an all time high of N520 as calls grew for a change of strategy and possibly change of personnel at the top of the apex bank. One month later, the exchange rate will now gain as over 35% closing below N400 for the first time since August 2016.
We have provided coverage of the FX rate like no other business news website and we have put together a timeline of events that may have led to the biggest rally the naira has seen at the black market on record.
Saturday, February 4th 2017
The CBN’s twitter handle tweets 16 vile messages aimed at critics who have voiced out against Godwin Emefiele’s handling of the forex policy. The CBN will later come out to claim that its handle was hacked
Wednesday, February 8th 2017
At a road show pitching the Nigerian Eurobond series, the CBN Governor, Godwin Emefiele told investors that they were “working on fine-tuning the foreign-exchange system.” That was the first hint that a new policy was on its way.
Thursday 9th February 2017
Naira crosses N500/$1 for the first time at the black market. Exchange rate at the start of the year was N490/$1
Thursday February 16th 2017
At a National Executive Council meeting chaired by the acting president, Professor Yemi Osinbajo, the CBN Governor was put on the spot by members who worried about the deteriorating forex situation in the country. Council members generally expressed concern over the current situation of the exchange rate and called for an urgent review of the current Forex Policy, especially the gap between interbank and the parallel market rates. The CBN Governor sued for patience and understanding, assuring that the situation is being closely managed.
Friday February 17th, 2017
The exchange rate between the naira and the dollar rose to 518, a new high.
Saturday, February 18th 2017
Reports surfaced that the CBN was planning on selling $1 million to deposit money banks from the next week. A CBN source had revealed that the CBN “will henceforth give weekly allocations of $1million to banks and expects them to sell to their customers at the rate of N375 per dollar. We hinted that this could strengthen the naira. The report also hinted that a new FX policy would be announced in the coming days.
Monday, 20th of February 2017
The exchange rate had climbed to an all time high of N522/$1. The market was in a frenzy and Nigerians wondered where the economy was headed.
The CBN responded with a new FX Policy. The new FX Policy was directed at the retail end of the fore market with the CBN selling forex to deposit money banks on a weekly basis. Banks were then instructed to sell to Nigerians looking for PTA, Medical Tourism and School Fees. All banks were eligible to buy for the CBN and allowed to sell to customers at a premium of 20%. The CBN also instructed banks to open FX outlets at major airports and retail outlets. The new policy also reduced FX forward sales from 180 days to 60 days.
Tuesday, 21st of February 2017
CBN sells about $417 million
Thursday, 23rd February 2017
Extreme volatility hit the parallel market as speculators scramble to offload their FX hoard. Signs were clear that the CBN was serious this time and no one was ready to take chances and so positions were exited in droves. The exchange rate will drop to an average of N485 by the end of the day. It was N505 the day before.
Interbank lending rates between banks hit 200% as banks scrambled to borrow from each other to purchase FX from the CBN.
Rating Agency Fitch issues its first comment on the FX policy claiming that “the most important aspect of the CBN’s announcement is a plan to normalise the FX interbank market.” It also opined that the new rule will favour commercial banks.
CBN also sold $231 million to commercial banks debiting their accounts for the naira equivalent.
Friday, February 24th 2017
The exchange rate closed the week at year high of N455 to the dollar. The naira had gained about N60 in one week.
Monday, February 27th 2017
- Rencap issued a statement claiming that using one of their Real Effective Exchange Rate (REER) models – the 22-year model which corresponds to a period when oil averaged $55/bl – implies fair value for the naira at N370/$, which via inflation should become N400/$ by end-2017.
- Exchange rate remained at N455/$1 but experienced high volatility. Some sold at below N450 in other parts of the country.
- The CBN also sold another $180 million to commercial banks
- BDC made their first reaction to the exchange rate. The President, Association of Bureau De Change Operators of Nigeria, Alhaji Aminu Gwadabe, said on Friday that the new policy was “a long awaited liberation the Naira needed to check speculators from manipulating the exchange rate for their selfish ends.”
- According to him, the market is already adjusting at a faster pace as the Naira continues to appreciate across board in all the major segments of the market.
- Gwadabe however emphasized that BDCs were not competing with commercial banks in the sale of the proceeds of International Monetary Transfer Services Operators to end-users. He also complained that the new directive did not provide a level playing ground for the banks and the BDCs to operate.
Tuesday, February 28th 2017
The spokesperson of the CBN, Isaac Okorafor. was heard on radio warning market players and keepers of dollars to make hay and sell their holdings to avoid heavy losses. The exchange rate closed at N460/$1 on Tuesday.
Friday, March 3rd 2017
The CBN sold another $350 million to commercial banks. It also reiterated its request that banks open retail outlets and desks at major airports. Our mystery shoppers also revealed most bank branches did not have forex to sell. The exchange rate was back up again to N475. Weary analysts wondered if the recent gains was a dead cat bounce.
Monday March 6th & Tuesday March 7th 2017
CBN sold $367 million and $100 million to commercial banks on Monday and Tuesday respectively. Exchange rate closes at N465 at the parallel market.
Thursday, March 9th, 2017
CBN sells another $170 million and exchange rate strengthens to N465/$1
Monday March 13th, 2017
CBN Governor announced winner of Vanguard Man of the Year. He also goes on the offensive against those calling for a free float of the naira. He reminds them that Egypt, which had just floated its currency, saw inflation rate rise above 30%. Exchange rate is now N459.
Tuesday – Thursday March 14th – 16th, 2017
Sources reveal that banks were already awash with FX and was not reducing the level of FX purchase from the CBN. The CBN will hear none of that and went ahead to sell another $440 million within 3 days to the FX market. Exchange rate, plummets again to N455/$1
The naira will close the week at N448/$1
Monday, March 20th 2017
CBN continues to flood the market with FX, and sells another $243 million between Monday 2oth and 23rd of March. The exchange rate falls to $400 to the dollar for the first time since August 2016, sending the black market in a frenzy.
Friday March 24th 2017
The exchange rate finally fell below N400/$1 for the first time since August 23rd 2016. The parallel market closed at N390/$1.
Going Forward
Can the CBN continue to defend the naira? Will the CBN float or devalue now? What is the likely effect of the drop in crude oil prices? Are speculators truly obliterated or are they buying back low to sell high? Will foreign investors see this as a positive development or would they still hang on till we float?
We will provide a detailed response to each of these questions throughout the course of the week.
Sale of dollars by the CBN since the new policy kicked in.
| Tuesday February 21st – $417 million |
| Thursday February 23rd – $231 million |
| Monday February 27th – $180 million |
| Friday March 3rd – $350 million |
| Monday March 6th – $367 million |
| Tuesday March 7th – $100 million |
| Thursday March 9th – $170 million |
| Tuesday March 14th – $190 million |
| Wednesday March 15th – $150 million |
| Thursday March 16th – $100 million |
| Monday March 20th – $143 million |
| Thursday March 23rd – $100 million |
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