Experts laud CBN’s effort at defending Naira, managing economy

Economic analysts have lauded efforts by the Central Bank of Nigeria (CBN) at stabilizing the nation’s economy and defending the naira.

In separate interviews with Voice of Nigeria, the analysts lauded the Godwin Emefiele led Apex Bank for its commitments toward fulfilling its mandate of maintaining Nigeria’s external reserves to safeguard the international value of the legal currency and promote an efficient financial system in Nigeria as well as enhance growth.

In defending the naira and ensuring stability of the currency in the foreign Exchange (FX) market, the CBN had implemented series of policies to manage the space and ensure that Banks are able to meet the demands of customers seeking forex for SMEs, school fee and medicals.

According to the CBN Governor, Mr. Godwin Emefiele, “As a result of our 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”.

Following these policies implementation especially the stoppage of FX allocation to Bureau De Change operators, the naira maintained relative stability since 2021, according to the CBN, at N411.50/US$ in August but declined to N414.33/US$ in December. The currency rate was N416.98/US$ in February 2022. For a long time, the CBN has used a controlled float exchange rate regime.

Many have described as bold, decisive and brave, the decision of the Central Bank under the Governor Emefiele to sanction Bureau De Change (BDC) operators for illegal forex trading, discontinuation of the sale of forex to the Bureau operators in Nigeria and the suspension of new BDCs licensing.

To encourage diaspora remittances and shore up the foreign reserves, the CBN also introduced the ‘Naira 4 Dollar Scheme’ and “Race to 200 billion US dollar in FX Repatriation.

“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,” CBN Governor said,

An Economist Dr Terfa Abraham, told Voice of Nigeria that, monetary policy approach of the CBN governor, targets output variables which has sustained the Nigerian economy.

“On 1-10, I will rate Emefiele 8, because managing the apex bank is not as easy as they think. The approach, monetary policy has many approaches, a particular governor can choose to focus on price stability, just ensuring that inflation is single digit and not care about GDP, about employment. However, Emefiele’s approach is to care about output variables, like unemployment, GDP, poverty. That’s why using the Anchors Borrowers Programme for instance, you hear them working a lot with farmers to ensure that small holders farmers including women are not left out in the economic equation, to ensure that they have access to credit, insurance and all the extension services that they will need”. 

Dr. Terfa noted that addressing inflation which posed a challenge to the economy remains a structural issue that goes beyond monetary tools.

“Also, you hear CBN intervention, there was a time inflation was just going up steadily, all that issue was not CBN’s fault. CBNs way of tackling inflation is if there’s inflation, CBN will withdraw money in circulation which is the classical ways of controlling and targeting inflation. But when the issue driving inflation are non-monetary based, like insecurity, shortage in food supply, flood, climate change issues, bad road networks. It’s difficult for the CBN to maintain its normal traditional way of doing things. So, Governor Emefiele came into CBN in a period where non-monetary approach to addressing monetary policy became the new normal”. He explained

In a chat with voice of Nigeria, a financial investment Consultant, Mr. Boniface Chizea, noted that even in the face of dwindling revenue from oil, the CBN’s development finance approach helped in defending the Naira against undue pressure.

“The only institution that sustained this economy without selling oil, at some point in time is the CBN. The price of oil dropped to $25 per barrel. We are not even selling the volume, we are not getting the money, all the things we did in this economy, the things that kept this economy going are because of the CBN’s development finance.”

Though the CBN has deployed necessary tools to raise Nigeria’s foreign exchange earnings, there is the need to build a strong institutional framework that supports manufacturing and export.

Senior Economist with SPM Professionals, Dr Paul Alaje, noted that the recent move by the CBN to raise 200 billion Dollar through remittances can only be achieved through export of non-oil products.

“What support economic growth is the institutional framework and the major stakeholder that can help and repatriate this money is through export of manufacturers within Nigeria. It will not just be from Agriculture, because if you look at what agriculture has done, over the years Agric has not been able to do twenty percent of what central bank wants to do in one year. Which other opportunity do we have? It has to do with manufacturers, so when you look at the programs the central bank also rolled out, I am happy that the manufacturing sector is one of the major targets of the central bank.”

The experts applauded the various interventions of the Central Bank in critical sectors which they say had helped the country exit recession and yield growth.