This, the Monetary Policy Committee (MPC) yesterday said, is to restore the automatic adjustments properties of the exchange rate.
Addressing journalists at the end of the bi-monthly MPC meeting in Abuja, CBN Governor Godwin Emefiele said: “The foreign exchange market framework is now ready. The MPC voted unanimously to adopt greater flexibility in exchange rate policy to restore the automatic adjustment properties of the exchange rate. Consequently, all nine members voted to hold and introduce greater flexibility in managing the foreign exchange rate.”
The MPC, in its assessment of the relevant risk profiles, Emefiele said: “came to the conclusion that although the balance of risks remains tilted against growth; previous decisions need time to crystalise. Consequently, in a period of stagflation (price rising continuously without corresponding increase in jobs), the policy options are very limited. To avoid complicating the conditions, the Committee decided on the least risky option to hold.”
The least risky option, he said, is the adoption of a flexible foreign exchange rate. However, the CBN “would retain a small window for funding critical transactions. Details of operation of the market would be released by the CBN in a few days time, the CBN governor said.