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UPDATE 1-Nigeria's central bank will keep controversial FX system

Published 24/06/2019, 11:11
UPDATE 1-Nigeria's central bank will keep controversial FX system

(Adds details, context)
By Chijioke Ohuocha
ABUJA, June 24 (Reuters) - Nigeria's central bank will keep
its foreign exchange system, its governor said on Monday,
supporting a controversial managed float of the naira that
investors and the International Monetary Fund have asked the
country to dismantle.
Despite years of inflationary pressure as global prices for
oil, Nigeria's main export, dropped, the government and central
bank have spent billions of dollars propping up the naira's
value in the face of calls for a free float. Central bank governor Godwin Emefiele announced his intent
to keep the foreign exchange system at a briefing in Abuja where
he laid out policy direction for the next five years.
"We would continue to operate a managed float exchange
rate," he said.
The naira officially trades at about 306 per U.S. dollar.
But it is sold on the black market at roughly 360 to the dollar,
a disparity that has frustrated importers and other investors as
well as the IMF.
Last month, Emefiele became the first central bank governor
to get a second term, after newly re-elected President Muhammadu
Buhari nominated him, a sign of policy continuity.
Emefiele also announced a plan to recapitalise Nigeria's
banks.
"Over the next five years banks would be required to hold
higher capital," he said, adding that foreign exchange
depreciation had weakened the industry's capitalisation.
The bank will discuss the plan at a committee of governors,
Emefiele said, though he did not say when this would be.
The governor added that Nigeria's pace of economic growth
remains fragile, but the central bank would strive to decrease
the inflation rate to single digits and maintain a positive
interest rate.


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