June 26, (THEWILL) – The World Bank has requested an adjustment in the exchange rate of the Investors & Exporters (I&E) window in Nigeria, stating that the rise in oil price has presented the Central Bank of Nigeria (CBN) to take review.
According to the World Bank, there is a need to adjust the current rate to reflect market dynamics. Prime Business Africa had reported earlier today that the naira exchanged at N421.33 to $1 in the I&E window, while one dollar was sold at N606 in the parallel market on Monday.
Considering the current rate, and rising demand for dollars, an adjustment is likely to send the cost of exchanging the United States currency in naira up, further weakening the Nigerian legal tender across all forex markets.
The World Bank gave the suggestion in its report titled ‘Nigeria Development Update (June 2022): The Continuing Urgency of Business Unusual.’ The International creditor caution that if its advice is taken, the CBN should implement the adjustment gradually.
The statement reads, “Favorable external conditions (oil prices being the highest in nine years) provide an opportunity to adjust the exchange rate reflective of market dynamics. Allowing further gradual adjustment in the IEFX rate, where the CBN manages the price, would help eliminate misalignment and alleviate persistent FX pressures.”
Recall that the global financial institution had criticised the monetary policies of the central bank, stating that the CBN is weakening Nigeria’s revenue mobilization, foreign investment, and the business environment at large.
In its continued condemnation of the policies of CBN under Godwin Emefiele, the World Bank said while the financial regulator said it has unified the multiple exchange channels, after the apex bank adopted I&E window as its official forex market (leaving out the black market), it is still financing about four FX markets to control movement of forex.
“The CBN took steps to unify multiple exchange rates by adopting the IEFX window rate as its official exchange rate in May 2021. However, different windows still exist, and the parallel rate premium continues to climb, reaching 39 percent over the official IEFX rate in March 2022.” World Bank wrote.
The channels are the I&E window, the secondary market intervention sales retail window, SME window, as well as the window for invisibles. The CBN is reported to be supplying FX at different rates to participants of the various forex markets.
In its statement directed to the Nigerian central bank, the World Bank said the “benefits of a more effective exchange rate management, with a view towards a unified and market-reflective exchange rate, are more significant than in previous years.“