On Monday, Nairametrics published excerpts from a BusinessDay interview conducted with the CEO of FMDQ Koko Onadele. The riveting interview, said to have stirred the hornet nest somewhere in Abubakar Tafawa Balewa Way
Central Business District Abuja, is perhaps the most revealing state of the forex market in Nigeria from an insider’s point of view.
In another rebuke at the CBN’s policies the CEO of FMDQ provided the closed confirmation on suspicions that the CBN was indeed manipulating the forex market in a bid to control prices. He said this when answering questions in an interview that appeared on Businessday, on Monday. The interview contained a lot of revelations about the challenges in the Flexible Exchange Rate policy and why it is not working. But what has also caught out attention is his suggestions that the flexible exchange rate policy is not “credible” and was being “controlled” by the CBN;
When asked of his assessment of the FX Market;
The first three months have been below par, and without mincing words, the current FX market is illiquid as a result of low market confidence caused by lack of transparency and credible price formation. The spot market is disappointingly highly fragmented in the range of $/₦305 to $/₦360 and this may be even conservative.
On the CBN Governor Controlling the market
The currency peg went on for too long. Even ‘1994-Nigeria’ could not go on longer than 12 months. The current situation needs to be addressed before we collapse the economy. In financial markets, timing is everything, and we need to understand the psychology of financial markets and act fast. The CBN FX market management needs a major paradigm shift to boost economic activities. The Governor means well and wants the best for Nigeria but you can’t control in a liberalized FX market. You must respect market fundamentals.
Nairametrics gathers that one of the methods used by the CBN involves a direct “intervention” in the market selling dollars to buyers who bid low. This contradicts normal market behaviors where higher prices will typically attract supply, particularly in an illiquid market.
