Nigeria’s Central Bank Blames Volatile Forex Market On ‘Seasonal Demand’ For Dollars

The Central Bank of Nigeria attributed the recent fluctuations in the foreign exchange market to seasonal fluctuations in demand for dollars. During its 295th Monetary Policy Committee (MPC) meeting in Abuja, the bank highlighted the interplay between demand and supply in a functioning market system as the underlying cause of the volatility.

Members of the MPC noted a moderate increase in year-on-year headline inflation in April 2024 but observed significant declines in month-on-month measures for headline, food, and core inflation compared to March 2024. This suggests that the tight monetary policy stance adopted by the bank is starting to yield desired results.

Additionally, the committee acknowledged a marginal increase in external reserves between March and April 2024 and urged the bank to maintain its focus on building reserves. It commended the recent approval of licenses for fourteen international Money Transfer Operators (IMTOS), anticipating that increased competition would reduce transaction costs and encourage more remittances through formal channels.

Furthermore, the MPC expressed satisfaction with the stability of the banking system despite economic challenges. It praised recent recapitalization efforts and urged regulatory authorities to continue overseeing the industry to ensure its stability.

Regarding fintech operations, the central bank clarified that it does not oppose their activities and has not revoked any fintech licenses. However, it emphasized the need for stronger regulation to prevent potential loopholes. Mobile money operators, including fintech firms such as OPay, Palmpay, Kuda Bank, and Moniepoint, are expected to resume new customer enrollment in the coming months.

In conclusion, the Central Bank of Nigeria’s analysis attributes recent forex market volatility to seasonal demand dynamics. The bank’s monetary policy measures are showing signs of effectiveness, reflected in declining month-on-month inflation rates. The approval of IMTO licenses is expected to enhance remittance inflows, while efforts to strengthen regulatory oversight aim to ensure the stability and integrity of the financial system.

SaharaReporters