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Bullion

Keywords

Foreign exchange market, Exchange rate management, Foreign exchange convergence.

Abstract

The fact that Naira is floating is not a panacea for effective monetary policy management learning from the Argentina experience. Also with volatile capital flows, there are associated over - and undershooting of exchange rates that the economy would encounter. This paper discuss the achievement of convergence in the Nigerian foreign exchange market and monetary policy, the liberalization of the foreign exchange market and the process of foreign exchange convergence. It was observed that there were supply shortage and so the supply side of resource allocation was deployed. It was also observed that the harmony between the money market and foreign exchange market must be strengthened. The exchange rate is exogenous to money market operators while the interest rate is exogenous to foreign exchange market and both require having consistency in resource allocation. The CBN then took the decision in March, 2006 to allow the BDCs to the official market as brokers. The brokerage was to have the BDC operators come to buy cash at the official windows twice a week and thus increased the supply of dollar.

Author Bio

The author is a staff of Central Bank of Nigeria.

Publication Title

CBN Bullion

Issue

3

Volume

30

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