The Central Bank of Nigeria (CBN) has intervened in the forex market, stating that the volatility is expected to ease soon.

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The Central Bank of Nigeria (CBN) has announced its intervention in the foreign exchange market, expressing its belief that the market's volatility will soon become more moderate.

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"We have already begun intervening and have been doing so for some time. We will continue our interventions to bring the market to levels that we consider appropriate," stated acting CBN Governor, Folashodun Shonubi, following the bank's Monetary Policy Committee (MPC) meeting in Abuja on Tuesday.

Furthermore, the MPC raised the Monetary Policy Rate (MPR), which is a measure of the interest rate, from 18.5 percent to 18.75%.

In May 2023, during his inauguration, President Bola Tinubu emphasized the need for a comprehensive reform of monetary policy, including the establishment of a unified exchange rate. This move would redirect funds from speculative activities to more meaningful investments in infrastructure, equipment, and job creation.

On June 14, 2023, the CBN eliminated the segmentation of the forex market into various windows and instructed Deposit Money Banks to freely float the naira against major international currencies, removing the previous practice where the CBN dictated exchange rates.

Addressing reporters, the acting CBN chief clarified that their objective is not to unify any rate immediately. Instead, the focus is on promoting efficiency and effectiveness in the market, which requires some time for adjustment. The current volatility is partly due to the market finding its equilibrium and addressing the pent-up demand that the current supply may not adequately meet. As the market eases and supply satisfies the demand, a more stable and efficient market is expected to emerge.

He also mentioned that the term "Investors and Exporters (I&E) window" is no longer fully accurate, as the market now allows participation from licensed institutions, making it more inclusive. The CBN anticipates that the current volatility will normalize in due course.

The CBN's role is to intervene in the market to maintain a reasonably stable level. They have their perspectives on what that level should be, and as the market fluctuates around it, the central bank may engage in buying or selling to fulfill its role.

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