Central Bank of Nigeria Communiqué No. 63 of the Monetary
Policy Committee Meeting, May 21, 2009

The Monetary Policy Committee (MPC) had a meeting yesterday and reviewed
money and foreign exchange market developments. The Committee noted that
there was a need to address the problem of excess liquidity in the system without
necessarily putting pressure on interest rates.

The MPC noted that the exchange rates have remained stable at both the official
and the parallel market rates for some months now. However, there has remained a
wide premium between the official and parallel market rates.

The MPC observed that the medium term outlook for the forex market was stable.
Consequently, the MPC decided to review the series of controls instituted in the
last few months, and over the next three months return to fully liberalized regime
that we had before the recent controls.

We believe that the premium between the parallel and official exchange rates will
narrow significantly in the days ahead, and we can sustain the changes over time.
The CBN is also exploring the possibility of introducing futures and swaps in the
foreign exchange market.

Decisions:
Consequently, the MPC decided as follows:
1. To issue short-term instruments to be synchronized with the Debt
Management Office’s (DMO) issuance of the FGN Bonds to mop-up excess
liquidity in the system.

2. To return to a regime of fully liberalized foreign exchange market over the
next three months. As a first set of measures towards the return to Wholesale
Dutch Auction System (wDAS), the Committee decided to increase the net
foreign exchange open position (NOP) for banks from 1.0 to 2.5 per cent
with immediate effect, while keeping in view the possibility of raising it
further at the end of June 2009.
3. Banks are no longer mandatorily required to sell to the CBN, after 5 days,
funds sourced from non-rDAS and non-oil export proceeds and may use
such funds for interbank transactions.
4. Removal of the requirement that banks transact foreign exchange at 1.0 per
cent around the CBN rate. The CBN will now participate in the interbank
foreign exchange market at the prevailing rate.
5. Effective June 1, 2009, rDAS will be twice weekly.
6. Approval-in-Principle (AIP) has been granted to 50 non-bank Class ‘A’
BDCs. The list of the BDCs will be published from Saturday, May 23, 2009.
As from next week (week beginning from May 25, 2009), about US$60
million will be sold to the BDCs per week. The BDCs are expected to sell at
retail rate of not more than 2.0 per cent above the CBN selling rate.
7. Government Agencies and Oil Companies will have discretion to sell
foreign exchange at the interbank foreign exchange market or to the CBN
with effect from May 25, 2009.

Professor Chukwuma C. Soludo, CFR
Governor, Central Bank of Nigeria
May 21, 2009