Central Bank of Nigeria governor, Godwin Emefiele said on Tuesday that the investors’ foreign exchange window created just about a month ago has attracted up to $1.1 billion even without major interventions by the regulator.
Emefiele was addressing a press conference on the outcomes of the two days Monetary Policy Committee meeting and also said the CBN would continue to support FX injections into the economy until lower naira rate convergence is achieved.
“I have said it and I would repeat, that the interventions would be more vigorous and intense to underscore the fact that we are determined to ensure that the Nigerian economy recovers by ensuring that foreign exchange is made available for all sectors of the Nigerian economy to conduct their business,” the governor stated.
The CBN announced in April a new Foreign Exchange widow for investors and exporters tagged: “Investors’ & Exporters’ FX Window” which targets to boost liquidity in the forex market and ensure timely execution and settlement for eligible transactions.
The window came two weeks after the CBN opened a special Forex window for Small and Medium Enterprises (SMEs) to enable SMEs import eligible finished and semi-finished items.
“In the investors window, I must say that I am gratified that just in four weeks, we have seem over $1.1 billion coming in through that window and that this gives credence to the fact that this is a decision in the right direction,” Emefiele said in response to questions on the success of the policy.
Supply of foreign currency to the window is through portfolio investors, exporters, authorized dealers and other parties with foreign currency to exchange to Naira.
The CBN is also be a market participant at the window to promote liquidity and professional market conduct.
“And truly, the CBN intervention in that window is about or less than 30 percent, meaning that if about 70 percent or more is coming from the non oil exporters as well as the portfolio investors, it means the policy is working and must be given additional support,” the governor stressed.
Eligible transactions under the new window include invisible transactions such as loan repayments, loan interest payments, Dividends/Income Remittances, Capital Repatriation, Management Service Fees and Consultancy fees.
The eligible list are Software subscription fees, Technology Transfer Agreements, Personal Home Remittances and any such other eligible transactions including ‘miscellaneous Payments’ as detailed under Memorandum 15 of the CBN Foreign Exchange Manual, according to the circular.
Emefiele explained that the investors’ forex market is a willing buyer- willing seller market and that the CBN would not lean to the banks on the direction of exchange rate.
“I am also delighted that what we see from the time we announced this policy, the rate was as high as N400/$, but it has moved downwards to as low as 350, 385 naira to the dollar, which is a very, very positive sign.”
He said the trend is also seen in the equities market, where stock prices have moved up, and the market capitalisation as well as all share index all moved up by as much as 3,000 just within two to three weeks.
“These are strong positive signs that tell us that we are on the right course and that all is needed is support to continue to push in this direction. “
Emefiele also reiterated his earlier view that the economy would pull of recession by the third quarter of 2017, considering what he called positive signs, that included, downward inflation, improved GDP to the extent that the negative growth has decelerated quite significantly, improvement in industrial capacity, as well as positive signs in various sectors of the economy.
Figures released by the National Bureau of Statistics on Tuesday indicated that Nigeria’s economy contracted by –0.52% (year-on-year) in the first quarter of 2017 in real terms, raising hopes that the Africa’s largest economy could jump out of recession faster than expected.
“I am very confident that by the end of third quarter, we would be out of reversion and I still hold that position,” the governor noted.
He also pointed to the risk of US Fed normalization which he said could upset the gains so far, and also the possibility of increased production of shale oil but that the key solution remains diversification of the economy.
But the governor does not anticipate that those adverse consequences will be so intense in the Nigeria’s environment because these investments have long left the country “and we are just at a point of trying to bring them back.”
“I am not that pessimistic that the adverse consequences of FEC nomalistaion will have great negative impact,” he added.
Onyinye Nwachukwu, Abuja
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