Naira has remained largely stable at the Investors and Exporters (I&E) window, following the demand management policy of the Central Bank of Nigeria (CBN), Godwin Emefiele, governor of the CBN said on Thursday.
This he said was particularly since the discontinuation of foreign exchange (FX) allocation to Bureau De Change (BDC) operators along with the convergence between the CBN and NAFEX rates.
On July 29, 2021, the CBN announced the immediate discontinuance of foreign currencies sales to Bureaux de Change (BDC) operators in Nigeria. In addition, the CBN also suspended the applications for and issuance of new licenses for BDC operations in the country.
“Banks are now able to meet the demands of their customers seeking forex for SMEs, school fees, medical and PTAs,” Emefiele said at the ongoing seminar for Finance Correspondents Association of Nigeria (FICAN) and business editors, in Akure, Ondo State.
“Towards containing inflation and cushioning the impact of the drop in the supply of foreign exchange in the economy, not only did we tighten the monetary policy stance over a period, but we also introduced demand management approaches to conserve our reserves and support the domestic production of certain goods,” he said.
One of the CBN’s demand management measures was to encourage the manufacturers to consider local options in sourcing for raw materials by restricting access to FX on some items (43). Four of these items alone, at the time, constituted over =N=I Trillion of the country’s annual import Bills.
In addition to these measures, the Central Bank also established an I&E, to allow for the purchase and sale of FX at the prevailing market rate. Furthermore, the apex Bank ensured the liberalization of the Foreign Exchange Market through the operationalization of the “Revised Guidelines for the Operation of Nigerian Inter-bank Foreign Exchange Market” in June 2016. The guidelines introduced the Naira-settled Foreign Exchange, Futures Market.
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Other measures taken by the CBN include a partnership with commercial banks to go after Nigerians who falsely bought dollars under the pretence of travelling abroad and ended up roundtripping. The CBN also introduced the ‘Naira 4 Dollar Scheme’ to encourage diaspora remittances.
Emefiele noted that the country’s current account deficit has narrowed significantly due to a surplus position in the goods account. The surplus position in the goods account is occasioned by a reduction in imports, an increase in crude oil and gas export receipts and an improvement in remittances.
“Remittance inflows has been supported by our ‘Naira for Dollar’ scheme, and we have seen a surge in remittance inflows. In our sustained effort to reduce foreign exchange demand pressure and facilitate investment, the CBN, on April 27, 2018, signed a 3-year bilateral currency swap agreement of US$2.5 billion, equivalent to ¥15.0 billion or N720.0 billion with the Peoples Bank of China (PBoC.) 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,” he said.
Speaking further, he said, “Despite the headwinds associated with the pandemic, the Central Bank has worked very hard to ensure that Nigeria remains a vibrant economy with a diversified mix of opportunities across sectors such as ICT, Manufacturing, Solid Minerals, Trade and Agriculture. Notwithstanding these modest achievements, we cannot afford to rest on our oars as the work is far from over”.
