CBN clarifies its stance on currency conversion that is not legal

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The Central Bank of Nigeria (CBN) has clarified its governor Godwin Emefiele’s warning regarding currency conversion fraud. It was stated that the warning only applied to anyone trying to convert naira in their accounts into foreign exchange (FX) in order to finance political campaigns and did not apply to people trading currencies for legal reasons.

Emefiele cautioned lawmakers who tried to withdraw naira in exchange for dollars at the briefing held after the MPC meeting, emphasizing that they would face the wrath of the law as such activity is unlawful.

Osita Nwanisobi, the company’s director of corporate communications, stated in a media chat that the explanation was required in light of what he called an attempt to intentionally distort the governor’s warning against speculative and electioneering spending.

Nwanisobi claims that the CBN Governor’s admonition was directed at people who wanted to exchange their local currency for foreign currency to use in political campaigns rather than people who needed money for legitimate reasons like paying for tuition and other personal costs.

Reiterating the bank’s position, the spokesperson stated that the CBN likewise disapproved of the behavior of unauthorized fund transfers both inside and outside the nation and was determined to use the appropriate legal laws to stop the flow of illicit monies.

Nwanisobi said the CBN was within its legal bounds to mop up the surplus liquidity in the vaults of the institutions it regulated to stop speculative activity. He maintained that the apex bank, in keeping with its mandate, has discretionary power to prevent anyone from performing illicit transactions.

In order to avoid infringing any applicable regulations, he recommended consumers not to participate in the unauthorized movement of funds for currency conversion.

Nwanisobi also urged Nigerians to display greater patriotism in order to maintain the value of the naira, stressing that it is everyone’s responsibility to support the CBN in this effort.

At the black market and peer-to-peer window, the naira is still moving in extremely erratic directions; as of yesterday, it reached an all-time low (ATL) of N650 to the dollar at the latter. It seems unlikely that the dollar would drop below N600 at the window very soon given that parallel market rates are currently significantly higher than N600/$.

The local currency market can show signs of the rising dollar’s worth on the global market. In recent weeks, the US Dollar Index (DXY), a gauge of the value of the dollar in relation to a basket of other currencies, has stayed optimistic.

It recently surpassed 2002’s peak of 108 points. It calmed throughout the week but began to increase on Wednesday as worries about the resumption of the rate rise spree and monetary tightening increased.

The European Central Bank (ECB) joined the hawkish camp yesterday, raising interest rates for the first time in 11 years in an effort to curb the eurozone’s soaring inflation.

Markets were taken aback when the monetary authority of the 19 nations that use the euro increased its benchmark rate by 50 basis points to make its deposit rate zero.

Analysts had anticipated the bank to increase rates by 25 basis points because it had been acting quite sluggishly during a rate hike spree.

From March to June, the Federal Reserve System hiked interest rates three times, totaling a 150 basis point increase. According to some analysts, as the Federal Open Market Committee (FOMC) meets the following week, a further 1% hike could be considered.

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