President Buhari was away on vacation when the Central Bank Governor, Godwin Emefiele announced to the world that Nigeria will now be adopting a flexible exchange rate policy that entails a full floating of the Naira.
One of the immediate consequences of that is a huge depreciation of the Naira when the market eventually opens on Monday. Analysts tracked by our team throughout today suggest the price could fall to as low as N370 to $1. It appears now that the CBN Governor, Godwin Emefiele had is own view as well.
In an exclusive report by Reuters, the news wire reveals that the CBN Governor had sent a letter to President Buhari informing him that he was “reasonably optimistic that the naira will settle at around 250 to the U.S. dollar after an initial period of weakness following a flotation on Monday”.
This is perhaps the first inkling of what the dollar could be trading at when the market does open on Monday. Expectedly, the CBN will have to be the initial supplier of liquidity for a market that is starved of funds and as such may open with its preferred price. Recall, the CBN Governor did not mention any new exchange rate at his press briefing, making this revelation all the poignant for us all.
In fact, it appears that the President had approved a price of N250 to the dollar going by the Reuters article.
Giving the first indication of a target, Governor Godwin Emefiele said in a June 3 letter to Buhari — seen by Reuters — that the central bank hopes the naira will eventually trade at around 250 per dollar, a level the president has “approved”.
“I must assure Your Excellency that we are indeed reasonably optimistic that at some point the rate will settle around 250 naira,” Emefiele says in the letter.
The letter, which briefs Buhari on the foreign exchange plan announced on Wednesday, says it could take three to four weeks to clear a $4 billion backlog of foreign exchange demand.
Buhari has for months said that he does not want the naira to be devalued, but backed a more flexible exchange rate policy when the central bank outlined its plans in May, without elaborating.
It is on record that President Buhari was vehemently against a devaluation so one is not really sure if he was fully informed of the extent of this new currency regime. The President did pen an op-ed in the Wall Street Journal on Tuesday where he voiced support for the “Greater Flexible Currency Regime”. His antecedents and perceptions is enough to create doubts in the minds of naysayers whether he actually understands the full implication of the new currency regime.