The Central Bank of Nigeria (CBN) is poised to address the surging demand for dollars by increasing its intervention in the market. In a strategic move aimed at stabilizing the exchange rates, the CBN plans to flood the market with additional dollars, according to informed sources.
Folasodun Sonubi, Acting CBN Governor, disclosed these plans after briefing President Bola Tinubu about the bank’s determined efforts to halt the naira’s slide against the dollar. The underlying objective of this move is to prevent further depreciation of the naira by ensuring a steady influx of foreign currency into the market.
The decision aligns with the CBN’s ongoing efforts to maintain a stable naira, a task that requires bolstering reserves and managing the balance between demand and supply. Historically, the bank has injected funds into the foreign exchange market whenever necessary, a practice that has now become a routine management task.
The urgency of the situation has prompted the CBN to adopt demand management policies, even though the government initially aimed for a free market approach. The overwhelming demand for foreign exchange necessitates a delicate equilibrium that can only be achieved through strategic policies to restrict and manage the demand.
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Addressing the foreign exchange shortage requires a multifaceted approach that addresses both the demand and supply sides. By releasing more dollars into the market, the CBN aims to quell the growing demand and stabilize the naira’s value against the dollar.
Notably, Nigeria’s central bank has recently abolished the multiple exchange rate system, moving towards a more flexible approach. Despite this shift, the naira continues to face challenges, as the disparity between the official and black market rates widens.
The CBN’s forthcoming injection of dollars is expected to provide much-needed stability, fostering a conducive environment for trade and economic growth. As the bank’s intervention seeks to alleviate dollar shortage concerns, it stands as a testament to the institution’s commitment to maintaining a resilient and balanced currency market.
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