While I have been supportive of the CBN’s “interventions” in the stock exchange, I think at the end of the day, they might have to relax the regulations on the FOREX tradings.

The Naira has lost clost to 50% of its value in the last 4 months.

My main reason for the need for relaxing of the regulations is its effects on the banks. Banks make up a huge chunk of the Nigerian Stock Exchange and are a major employer of labour. When you think of it, banks as a whole, will be the second largest employer of labor after the government (federal and state).

A lot of these banks have secured loans from international finance companies and banks to finance their operations. Most of the time, these loans were secured in foreign currency -  especially dollars.

With the steep decline in the value of teh Naira, these loans cost more. Imagine if a bank secured a loan of $500m last year. That would have been about N60b then. But today, it will be around N90b in today’s real Naira value. This means that these banks will be paying significantly more to service these loans.

The cost of servicing these loans will ultimately be passed on the regular bank customers as increased rates for borrowing from these banks and for lower interest rates for savings.

It will also result in these banks undertaking “cost cutting” measures, most notably downsizing.