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Senate proposing law to halt 6-months-old free float of naira

Signal that the National Assembly members are not happy with the prevailing free floatation of naira in the last six months has emerged.

The Senate is working on a proposal that will come up as a Bill seeking to give the Central Bank of Nigeria (CBN) legal instrument to set exchange rates, and stop it from allowing free floatation of Nigerian currency which had exposed the country to galloping inflation in the last couple of months.

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 apex bank decide those rates itself.

Already, the draft had scaled two readings in the Senate and will be put to a public hearing early next year.

He said in an interview that “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.”

Preliminary details of the emerging law say “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.

Besides, industry pundits say the apex 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.