AN investment company has commended the closure of Retail Dutch Auction system (RDAS) and Wholesale Dutch Auction System (WDAS) foreign exchange windows, saying it would bring positive changes in the capital market.
BGL, the Investment Banking Company gave the commendation in its report published yesterday to analyse the benefit of the Central Bank of Nigeria (CBN)’s decision to close the foreign exchange window expected to ensure the stability of the currency.
The CBN had on Wednesday closed the RDAS and WDAS foreign exchange windows to help stabilize the nation’s currency.
It directed all authorized dealers and general public to channel all demand for foreign exchange to inter-bank foreign exchange market.
The apex bank further assured that it would continue to intervene in the inter-bank foreign exchange market to meet genuine and legitimate demands.
“The implication of this action on the capital market is expected to be largely positive in the medium to long term.
“The short term implications are hazy considering the heightened political environment and its effect on economic prices.
“ In the medium term, market determined exchange rate will support the evolution of the local foreign currency futures, derivatives and hedging contracts, which will support a more stable exchange rate market.’’
The BGL report said that a stable exchange rate along it long run equilibrium level would support robust capital market development and growth.
It said that this would boost foreign investor’s confidence in the market with predictable naira exchange rate variables.
It said that the monetary policy effectiveness would also improve with the action.
The report said that more stable exchange rate outlook post-election would attract portfolio investors back to the country, adding that strategic investors, both domestic and foreign would be quick to take opportunities immediately.
It advised that the apex bank to immediately make available to the public clear a number of issues like what it meant by intervening to meet genuine and legitimate demands.
The report said that CBN must clarify what would qualify as genuine and legitimate demands and how its intervention in the market would be operated.
“The second issue is the expected operational structures of the Bureau the Change (BDC) considering that they were currently barred from sourcing foreign currency from autonomous sources.
Godwin Emefiele, CBN Governor
