SAN FRANCISCO, March 12, (THEWILL) – In the past fortnight, the value of the naira has refreshingly risen against the United States dollar. This development is coming at a time many a stakeholder appear to have lost confidence in the recovery of the local currency with currency speculators going on overdrive.
Against this backdrop, the Central Bank of Nigeria, CBN, under the leadership of Godwin Emefiele moved to make life easier for Nigerians and prove to naysayers that all hope was not lost regarding the ability of the naira to compete with major currencies in the international community.
The CBN’s special wholesale intervention fund in the interbank foreign exchange and forex markets started yielding fruitful results when it offered $500m to 23 banks and other authorized dealers to meet the visible and invisible requests of customers.
THEWILL believes that if the new policy is sustained, it would further discourage some parallel market operators, who had in anticipation of a continued plunge of the naira bought huge volumes at over N500 to a dollar.
The apex bank’s direct increase in the volume of dollars released to banks would go a long way in meeting the needs of Nigerians, who before now, found it extremely difficult to obtain forex for their medical treatment, children’s school fees, even as manufacturers could not access the dollar to import spare parts, raw materials and machinery for the production of good and services.
Expectations are high that if the CBN is able to sustain the new forex policy, the prices of goods and services, which had since gone out of the reach of the common man, may reduce in the long run.
This new approach by the CBN, which also enabled Bureau de Change, BDC, operators get enough funds, has indicated that the sustenance of the new regime would stimulate local production, which is vital in navigating the country out of the current recession.
However, this is just the beginning. If the restructuring of the economy must be holistically addressed, the CBN must not only continue with the policy, but should further liberalise the allocation in order to rekindle confidence in the monetary system.
It is apparent that the rise in the value of the naira could be linked to the increase in foreign reserves ($30bn), which before now had plummeted to an all-time lows.
With the success recorded by the reversal of the initial selective policy, THEWILL urges the CBN to go the entire gamut of the intervention by ensuring that the policy is not sabotaged or abused by speculators and other unscrupulous business interests.
Nigerians are mindful that earlier directives by the apex bank, directing banks to reserve 60 per cent forex for the manufacturing sector was not totally complied with. Allowing critical players to arm-twist the CBN is not unlikely given banks’ earlier complaints in the old regime that the regulator should not force them to sell forex they procured from the autonomous market.
In the light of these challenges, it is recommended that a consistent approach be pursued to give confidence to the public in their long-term planning.
THEWILL believes in the capacity of the new approach to reduce inflation and close the gap between the official and parallel market rates. With the naira appreciating at the street market and the concomitant boost in local production and exports, there is optimism that prices of goods would reduce.
The end result of these reactions would be that the purchasing power and real income of the average consumers would rise to the volume of the money in circulation. This is why the CBN under the resurgent Emefiele should continue with the present approach that has proven to ease the pressure on the local currency.
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