The decision by the Central Bank of Nigeria (CBN) to discontinue forex allocation to Bureau De Change(BDCs) appears to be achieving the right result as information from the bank shows that its current account deficit has narrowed significantly due to a surplus position in the goods account.
This is even as the CBN has, in the last three years, defended the nation’s currency(Naira) with about $89million.
The surplus position in the goods account is occasioned by a reduction in imports, increase in crude oil and gas export receipts, and improvement in remittances.
The CBN governor, Godwin Emefiele, who disclosed this in his welcome remarks at a seminar for financial correspondents and business editors in Akure, Ondo State yesterday, noted that, as a result of the bank’s demand management policy, “the Naira has remained largely stable at the I & E window, particularly since the discontinuation of FX allocation to Bureau De Change operators along with the convergence between the CBN and NAFEX rates.”
He said banks are now able to meet the demands of their customers seeking forex for SMEs, school fees, medical and PTAs.
The apex bank governor also disclosed that remittance inflows has been supported by the bank’s ‘Naira for Dollar’ scheme, adding tha, it has also result in a surge in remittance inflows.
In its effort to reduce foreign exchange demand pressure and facilitate investment, he said, the CBN, on April 27, 2018, signed a 3-year bilateral currency swap agreement of $2.5 billion, equivalent to ¥15.0 billion or N720 billion with the Peoples Bank of China (PBoC.)
BDCs Demand Share Of $20bn Forex Inflow
“It is heartening to note that these policies are yielding positive results in terms of meeting genuine demand for foreign exchange and exchange rate stability,” he stated.
Emefiele said, the country, with its vast arable land is able to meet the ambitious target of the Produce Add Value and Export (PAVE) initiative, noting that, the apex bank will continue to work towards ensuring that the country’s economy remains vibrant and productive .
According to him, many countries that are much less endowed than Nigeria are doing it. “Consider for example that agriculture exports alone from the Netherlands was about US$120 billion last year. Yet, Netherlands has a land mass of about 42,000 square kilometers, which is much smaller than the land mass of Niger State alone, at over 76,000 square kilometers.”
Whilst stating that the Covid-19 pandemic had impacted economies, and disrupted business activities globally, Emefiele who was represented by the deputy governor, Corporate Services, Adamu Lamtek, said Nigeria, like most commodity-dependent countries, was not spared the deleterious impact of the pandemic, given our dependence on crude oil export as a major source of revenue and foreign exchange.
“PAVE is expected to make Nigerians consume what they produce, add value to it, and even export the surplus. It is to mitigate against future severe consequences of shocks beyond our control that we must all join hands to ensure the success of PAVE. It is a clarion call to patriotism.
“It is an initiative akin to South-East Asia’s much referenced export-led industrialization policy which changed the economic fortunes of countries such as South Korea, Taiwan, Malaysia and Singapore. PAVE is designed to be the key for fast-tracking a bucket of substitutes to Crude oil export. It encourages backward integration for the local production of select items
“Despite the headwinds associated with the pandemic, the Central Bank has worked very hard to ensure that Nigeria remains a vibrant economy with a diversified mix of opportunities across sectors such as ICT, Manufacturing, Solid Minerals, Trade and Agriculture. Notwithstanding these modest achievements, we cannot afford to rest on our oars as the work is far from over.
“I am mindful that our goals may appear ambitious to some, but I am resolute and determined that we can achieve it. Only recently, in consultation with the Banking Community, the CBN announced the Bankers’ Committee ‘RT200 FX Programme’, which stands for the ‘Race to $200 billion in forex Repatriation’.
“The RT200 FX Program is a set of policies, plans and programs for non-oil exports that will enable us to attain our lofty yet attainable goal of $200 billion in forex repatriation, exclusively from non-oil exports, over the next three to five years.”
Meanwhile, the Central Bank of Nigeria(CBN) has, in the last three years, defended the nation’s currency(Naira) with about $89million, LEADERSHIP learned.
According to a data sourced from the CBN, the apex bank’s intervention in the first quarter of 2019 was $10.6 million, while the intervention was $7.3million in Q2 even as $10 million was injected into the forex system in third quarter 2019 and $10.4 million in Q4 2019.
In the first quarter of 2020, however, $13.7 million was injected in Q1, 2020; $4.9 million in Q2, 2020; $4.3 million in Q3 and $5.6 million in Q4 2020.
In the first quarter of 2021, the banking regulatory body defended the Naira with $5.2 million, intervened with $6 million in Q2, 2021; $5.3 million in Q3, 2021 and $5.1 million in Q4, 2021.
Delivering his paper on ‘An Overview Of The Exchange Rate Management And Economic Diversification In Nigeria!’ at the seminar in Akure, Ondo State yesterday, Professor of Economics and chairman, Goldmark Education Academy, Benin City, Prof. Mike Obadan, said, CBN, for quite some time now, operated a managed float exchange rate system.
Under this system and in line with its exchange rate stability mandate, he said, the apex bank has strived to intervene in the foreign exchange market by supplying foreign exchange.
“In recent years, it has sold forex at the Nigerian Autonomous Foreign Exchange Rate (NAFEX) widow (Investors & Exporters or I&E Window), Small and Medium-sized Enterprises (SMEs), Invisibles, and Retail Secondary Market Intervention Sales (SMIS) to ensure stability in the foreign exchange market,” he pointed out.
He, however, stressed that the capacity of the regulatory body is restricted by limited availability of foreign exchange and external reserves
Highlighting the factors that contributed to the naira exchange rate instability in terms of incessant fluctuations, Obadan, who is also a member of the Monetary Policy Committee(MPC), listed the factors to include: weak production base and undiversified nature of the economy; low productivity of the economy as available productivity per hour data shows Nigeria’s productivity is very low compared to many other countries.
High propensity to import and Import-dependent production structure, compounded by trade liberalization policy as well as comatose capital goods industry, he disclosed, are factors breeding exchange rate instability.