Central Bank of Nigeria (CBN) Governor, Mr. Godiwn Emefiele yesterday lamented that Nigeria’s huge external debt servicing practice has contributed to the depletion of the nation’s external reserves.
Emefiele spoke at the opening of the 32nd Seminar for Finance Reporters in Akure, Ondo State.
He said the apex bank’s methods, including the management of financial system liquidity, foreign exchange (forex) market and development financing initiatives, have been able to optimally balance the delicate objectives of price stability and real output growth.
According to him, in the desire to create jobs and diversify the economy away from crude oil, the apex bank had established numerous intervention programmes, such as Anchor Borrowers Programmes (ABP), Commercial Agricultural Credit Scheme (CACS), Creative Industry Financing Initiative (CIFI), MSMEDF, CBN Agribusiness, Small and Medium Enterprises Investment Scheme (AgSMEIS) and the Real Sector Support Facility (RSSF), among others with remarkable success in accelerating growth of the economy and reducing poverty across the country.
A non-executive member of the CBN’s Monetary Policy Committee (MPC), Prof. Micheal Obadan, also noted that heavy external debt servicing, tended to deplete foreign exchange reserves.
He identified other factors that contributed to the poor performance of the naira in the forex market to include: sluggish foreign capital inflow; speculative activities and sharp practices of authorised foreign exchange dealers, including the profiteering activities of bureau de change operators in recent years.
According to him, other factors that contributed to the depreciation of the naira include, weak production base and the un-diversified nature of the economy.
He noted that available productivity per hour data shows Nigeria’s productivity is very low compared to many other countries.
Obadan said the high propensity to import and import-dependent production structure, compounded by trade liberalisation, have also contributed to the weak state of the local currency.
He said the apex bank has implemented various strategies, policies and measures to enhance liquidity in the foreign exchange market and ensure the stability of the exchange rate.
The apex bank has also implemented development finance interventions which have implications for foreign exchange supply and exchange rate stability.
He listed the flowing as some of the strategies and policies introduced by the CBN. They include: measures to maintain stability in the foreign exchange market and reduce foreign exchange demand pressure; measures to enhance inflow of foreign exchange and diversification and measures to boost production, non-oil exports, forex supply and economic diversification.
Emefiele said the policy stopping weekly dollar allocation to Bureaux De Change (BDCs) operators has stabilised the naira.
He said the naira has remained largely stable at the Investors & Exporters window, particularly since the stoppage of forex allocation to BDCs.
As at yesterday, the naira exchanged at N416.25 per dollar at the official market, where the exchange rate has remained stable. However, at the parallel market, where majority of forex is sourced by manufacturers and retail end-users, the naira exchanges for about N575 per dollar, representing over N158 premium between both markets.
Emefiele however said that the local currency is now converging between the CBN and the Nigerian Autonomous Foreign Exchange (NAFEX) rate.
According to him, banks can now meet the demands of customers seeking forex for Small and Medium Enterprises (SMEs), school fees, medical and Personal Travel Allowance (PTAs).
He said Nigeria’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, increase in crude oil and gas export receipts, and improvement in remittances. Remittance inflows have been supported by our ‘Naira for Dollar’ scheme, and we have seen a surge in remittance inflows,” Emefiele said.
He said the apex bank has in its sustained effort to reduce foreign exchange demand pressure and facilitate investment, signed on April 27, 2018, a three-year bilateral currency swap agreement of $2.5 billion, equivalent to ¥15.0 billion or N720.0 billion with the Peoples Bank of China (PBoC.), adding that the CBN/PBoC partnership has worked well and yielding positive results in terms of meeting genuine demand for foreign exchange and exchange rate stability.
