The continuous intervention of the Central Bank of Nigeria (CBN) in the Foreign Exchange, (forex ) market has received massive backing of stakeholder’s most of whom insist that the regulator has all it takes to sustain dollar supply. CBN since last year commenced the intervene in the market following challenges posed by the level of depletion of the country’s foreign reserves, arising from issues such as a drastic reduction in oil earnings and speculative trading most especially at the parallel market.
On Monday, the CBN had offered $100 million in wholesale auction at the inter-bank Foreign Exchange market and intervened in the Small and Medium Enterprises (SMEs) and invisible segments, with the sum of $50 million and $45 million, respectively.
The Acting Director, Corporate Communications, Isaac Okorafor who confirmed the development said that the Bank’s intervention was in line with its commitment to sustain liquidity in the market to meet genuine requests as well as deepen flexibility in the foreign exchange market.
Monday’s sale follows the major intervention, last Friday, to the tune of $462,336,426.74, comprising $267,336,426.74 for the Retail Secondary Market Intervention Sales (SMIS), $100,000,000 for wholesale interventions, $50,000,000 for the SMEs forex window and $45,000,000 for invisibles.
Meanwhile, the stakeholders have noted that significant injections of foreign exchange into the market has reassured all foreign exchange users of the apex bank’s determination to continue to meet all legitimate FX demand in the market while striving to achieve exchange rate stability in the market.
Following the sensitivity of the forex market, industry watchers commended CBN’s intervention in the forex market, while expressing optimism that the apex Bank has the capacity to sustain the intervention.
It is generally believed that the forex market in any part of the world is a very sensitive market and as such requires effective and constant policing while the interventions are part of CBN’s plans to shore up the value of the naira against the dollar and achieve its exchange rate stability goal.
With several interventions amounting to billions of dollars the stakeholders maintained that CBN have the capacity to sustain the intervention, which they said would go a long way in supporting the nation’s economy.
Meanwhile, some financial analysts who spoke to Daily Champion on the condition of anonymity said that the continuous intervention of the bank has proved its capacity to boost the market, thereby strengthening the local currency.
To further keep its promise to market operators, and against the belief of many that the interventions was temporary, CBN last week injected the sum of $657.33 million into the foreign exchange market. The latest intervention saw the value of the naira gain strength at three of the foreign exchange markets rising by 0.8 per cent at both the parallel and Bureau de Change (BDC) ends of the market.
The naira also gained value at the Investors and Exporters foreign exchange market where it rose to N367.60 to the dollar from N360.6 which it sold earlier in the week as daily turnover in the market hovered between $75 and $50 million.
Analysts said the introduction of a new foreign exchange window for investors and exporters targeted at increasing forex supply in the market and allowing the timely settlement of transactions helped achieve the current exchange rate.
Speaking recently in Lagos at the Finance Correspondents Association of Nigeria (FICAN) Half-Year Economic, Chief Consultant of Biodun Adedipe Associates Limited, Biodun Adedipe, affirmed that CBN has the capacity to sustain ongoing foreign exchange interventions despite the pressure on the foreign reserves.
According to him, on the 30-day moving average, the reserves have risen from $29.07 billion at end of 2015 to $30.36 billion in July 11, adding that the liquid portion of the reserves stood at $29.62 billion, which translates to 12.31 months of imports cover.
Adedipe, who spoke on the theme: “Nigerian Economy: First Half 2017 and Outlook” said Nigeria’s total import figure for the first half of this year was N2.2 trillion ($7.218 billion), with an average monthly figure of $2.406 billion.
He explained that due to recession, the current import figure was a decline from $14.171 billion or monthly average of $4.724 billion in the first quarter of 2015. He said that foreign trade had picked up since the first quarter of last year, with imports declining.
Adedipe described as aberration calls on the CBN to freely float the naira, adding that no country in the world adopts such approach to exchange rate management. He said the ongoing spike in naira exchange rate occurred after the CBN was pressured by several stakeholders to adopt flexible exchange rate system and freely float the Naira.
“That of course, was a huge aberration, as there is no country that freely floats its currency (even the US) – the job of the central bank is to defend and protect its currency by intervening in the markets as necessary. The voices are coming from too many experts that know nothing other than to echo what the Breton Woods institutions have said,” Adedipe stated.
Agreeing with Adedipe, another analyst told Daily Champion that despite present economic situation in the country, the leadership at the CBN has all it takes to stabilize the naira and ensure liquidity at the forex market.
CBN’s Acting Director Corporate Communications, Mr. Isaac Okorafor, said then that the leadership of the CBN was impressed by the positive impact its current foreign exchange management was having on the manufacturing sector, agriculture and economic activities in general across the country.
While reiterating that the CBN management was also encouraged by growth in the non-oil sector, particularly agriculture, he noted that the apex bank would not relent in its efforts at sustaining stability in the inter-bank Forex market as well as ensuring the convergence between the exchange rates at the Nigeria Autonomous Foreign Exchange (NAFEX) and the Bureau de Change segments of the market.
According to him, the CBN would continue to ensure proper surveillance of the forex market to guard against any sharp practices by participants and uphold transparency of the process.
On his part, President/Chairman of Council, Chartered Institute of Bankers of Nigeria (CIBN), Prof. Segun Ajibola had noted that aggressive intervention by the CBN would help stabilize the naira.
He said,“What is happening in the market normally is a function of the forces of demand and supply. So, with the intervention of the CBN, we have seen some improvement in the foreign exchange rate in terms of naira and dollar, because supply has improved.
“We only pray that Nigeria as a country would continue to generate more foreign exchange, either from oil and gas, or from non-oil exports, so that the intervention would be sustainable and we begin to feel the positive impact of the intervention in the economy. So, it has been very helpful, but sustainability remains the concern”.
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