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Senator proposes law to halt naira free float

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Senator John Enoh

Senator John Enoh

A Nigerian lawmaker is proposing a new currency law that would give the central bank legal powers to set exchange rates, effectively rolling back the nation’s six-month-old free float.

The bill, sponsored by opposition politician John Enoh, would repeal existing foreign-exchange legislation, under which market rates are “mutually agreed” between counterparties, and allow the Abuja-based regulator to decide those rates itself. The draft has been through two readings in the Senate and will be put to a public hearing next year, according to Enoh, a senator representing the south-eastern state of Cross River with the main opposition People’s Democratic Party.

“The Bank may determine the basic exchange rate, rate of purchase and sale of foreign exchange and arbitrated exchange rate in foreign exchange transactions, if it is necessary to do so for harmonious and orderly foreign exchange transactions in Nigeria,” according to a copy of the proposed law seen by Bloomberg. “Residents and non-residents shall perform transactions in conformity with such basic exchange rate.”

If passed, the legislation would give the central bank more freedom to defend the naira, which has tumbled 37 percent to around 315 per dollar since Governor Godwin Emefiele abandoned the peg in June. Analysts say the central bank is still intervening to stop it weakening, with foreign-currency reserves dropping to an 11-year low in October. The black-market exchange rate has collapsed to a record 485 as dollar shortages in Africa’s most populous country mount.

The proposed law is separate from a draft amendment to existing legislation published last month by the Nigerian Law Reform Commission, an independent body. It proposed jailing people who hold dollars in cash for more than 30 days and restricting capital outflows. The central bank denied it was behind that document.

The naira fell 0.3 percent to 316.25 per dollar by 9:46 a.m. in Lagos, the main commercial hub. One-year, non-deliverable forward contracts trade at 435, a sign investors see more weakening to come.


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6 Comments
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  • Ayo Faleti

    What a country!
    Instead of making laws to promote a stable/conducive business environment as a catalyst for production, which will earn Nigeria foreign exchange, the senate wants to decree an exchange rate by fiat. This is like working from the answer to the question – putting the cart before the horse. The only people that will benefit from this ‘arrangement’ are these same senators, when they start using ‘access’ to round-trip forex to a burgeoning black market.
    Without oil where would the forex come from? Unless we are to start fraudulently printing our own Sterling and Dollars.
    Use your legislative platform to address Nigeria’s non-existing productivity, and the Naira will find its level.

    • amador kester

      Wonder if legislative bills could handle issues related to market forces even in a communist command economy. But let them try. If they succeed history will vindicate them, if they fail it would still not be said that they had sawdust in their brains

  • real

    pure stupidity and rubbish. instead of working to reduce the massive demand for dollar, increasing our export to earn more dollar and ensure good regulation. These fools are passing laws that would completely destroy the naira. why do you think the dollar cost so much? which common sense person or investor would sell dollar at the official market, that is rigged. The black-market has the true exchange rate of the dollar, because it is market based. what kind of fools do we have governing Nigeria?

  • MUkintu

    The real exchange rate for the Naira is the black market rate. Any other consideration is pure vanity and madness. There is no short circuit to development. Until Nigerians resolve to support local industries there will be no solution. We must undergo what every other nation went through. Nigeria must face facts and stop running around.

  • infinity2020

    Nigeria can never get back on his feet unless there is an industrial revolution!!!!!!! This means we have to become little china in Africa. How can we do that we must have at least 25000 mega watt energy capacity. If the senate like let them be amending the constitution everyday it will never bring the Naira at per with the dollar unless we have the manufacturing base !!!. Please focus on ENERGY problems !!!!!!!