CBN and assessment of oil prices on reserves, FX management

Of recent, topical issues like crude oil prices, external reserves and exchange rate management have been the center point of discussion, argument, analysis, suggestion, recommendation, among stakeholders.

In view of this the Central Bank of Nigeria (CBN) deemed it fit to educate and equip financial journalists in the country with adequate knowledge on this subject matter at the 20th seminar for finance Correspondents and business Editors, organized by the Apex bank in Calabar.

Renowned experts including Bismarck Rewane, managing director/CEO, Financial Derivatives Company limited, Shamsudeen Mohammed, head of strategy, Citibank Nigeria limited, Moses Tule, director, Monetary Policy department, CBN, Chibuke Uche, member, Monetary Policy Committee (MPC), CBN, Chika Mordi, former director, research department, CBN, Lamido Yuguda, director, reserve management department, CBN, and Stanly Egbochukwu, CEO/Publisher, Manufacturing Today Marketing Information Services limited, Lagos led the discussions at the seminar.

Rewane who spoke on “Evolution of the Foreign Exchange Market in Nigeria and the Way Forward”, addressed issues like evolution of exchange rates, exchange rates: types and determinants, history of exchange rate management in Nigeria, the Naira in the last 10 years country case studies of Ghana, Kenya Singapore, and outlook for the Naira.

He said Nigeria is facing currency crisis and the CBN has done its best to manage the currency but there is need to move to market determining price.

On the issue of fuel subsidy, he said the Federal Government should remove it for the foreign exchange rate policies to be efficient on the economy.

The Economist believes that when the government removes the petrol subsidy, the actual price of the naira would be determined and then the exchange rate will be brought down making the currency adjustment minimal.

Mohammed who represented Akinsowon Dawodu, chief executive, Citibank Nigeria limited, Lagos said the structure of the economy has to fundamentally change.

He cited example with Brazil which in 1999 first devalued its currency and it float by adjusting its fiscal policy. Delivering a paper on “Impact of Closure of RDAS and WDAS Segment of the Foreign Exchange Market in Nigeria”, he said the closure of the two windows is a good step in the right direction but better if the market determines the price.

Tule spoke on the ‘Crude oil Volatility: Implication for External Reserves and Exchange Rate Management in Nigeria’, saying the monetary and fiscal policies are suppose to be complementary in order to avoid crisis in the economy.

He said the declining oil price poses concerns for external reserves, inflation as well as the exchange rate of the naira.

According to him, a rapid fall in prices threatens Nigeria’s macroeconomic stability because foreign exchange earnings, government revenue and domestic money supply are largely dependent on receipts from crude oil exports.

Tule made it clear that continuing deterioration in oil prices would have negative impact on Nigeria’s oil export earnings, public revenue, foreign exchange reserves, value of naira and financial system stability. Also, volatility in oil prices threatens domestic inflation and inclusive growth.

He said there is urgent need for policy makers to implement appropriate reforms that will diversify the economy from large-scale dependence on oil.

Egbochukwu told participants that the financial journalist must be very passionate about his country, using the knowledge at his disposal to help deal with the numerous economic challenges confronting the nation.

HOPE MOSES-ASHIKE