OPINION: Common Misconceptions About Commercial Banks and Currency Devaluation


There have been speculations about commercial banks contributing to the devaluation of the Naira by artificially creating demand for the dollar through hoarding.


One of the many misconceptions constantly being peddled is the notion that seems to attribute the undue ability to influence the foreign exchange market to Banks. One might almost believe that they are not subject to constant oversight by regulators.


It is important to note that every Nigerian bank is regulated by the CBN, and as such, no bank can sell or buy at rates higher than those permitted by the Nigerian Autonomous Foreign Exchange Market (NAFEM).


This implies that commercial banks cannot operate independently when it comes to FX transactions.


It would be erroneous to suggest that commercial banks would readily engage in activities that could harm the foreign exchange market.


Both the black market and NAFEM rates fluctuate between highs and lows daily, sometimes even to the detriment of the banks.


Although individual attempts may be made to circumvent the market, there are strict regulatory measures in place to counter any foul play.


Therefore, one cannot imply that because the NAFEM rate is higher for one day, there are attempts to create artificial USD demand. Such economic assertions can only be considered worthy of note after studying the different market trends for a long time.

Abubakar Rasheed, a financial analyst writes from Kaduna 



Make your comments...