Victor EzejaEconomist and public affairs analyst, Mr Kelvin Emmanuel, has highlighted reasons the naira experienced stability in recent times and countered a claim that the Central Bank of Nigeria (CBN) spent about $8 billion to strengthen the local currency.
Mr Emmanuel said there is no evidence to back up such a claim which he described as “outlandish.”
Join our WhatsApp ChannelCEO of Financial Derivatives Company, Bismarck Rewane, who appeared on Channels Television’s News at 10, highlighted some interventions of the CBN in managing exchange rate volatility and inflation.
Mr Rewane had attributed the steady appreciation of the naira to $8 billion, which he said the CBN spent to defend the currency.
“There are many things that are happening: reserves of over $40 billion are coming down. We’ve also borrowed $4 billion in bond issues. When you look at all of that, we’ve almost spent $8 billion to support the naira at the current levels,” Rewane had stated.
However, in a post on his X handle, Mr Emmanuel said: “The claim that the CBN has intervened with $8bn to strengthen the current rally in the markets is outlandish as there’s no evidence to back such claim.
“The CBN has not seen consistent net asset ratio position in its external reserves with its six external asset managers above $10bn in Years, a lot of the FX that was supposed to come to markets from the sale of crude is used to settle forward sale agreement through swaps.”
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The analyst said the reasons for the current rally of the naira include an increase in the flow of Foreign Portfolio Investments (FPIs), and the introduction of the Bloomberg B-matching system at the Nigeria Foreign Exchange Market (NFEM) which introduced transparency in the system.
According to him, “There has been an increase in the flow of FPIs with 1-Year forwards taken to hedge risk.
“Deloitte has given a go on the $2.4bn outstanding of the $7bn in forwards for companies that had their funds hanging for years. So the CBN is drawing down on those positions
“The introduction of the Bloomberg B-matching system at the NFEM and migration from the managed float, has seen primary dealers gradually comply with the policy directive from Trade and Exchange to hold 0% long onshore and 20% short onshore — that has strengthened liquidity and transparency in the markets.”
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He added that the “naira is undervalued by 30% but it requires fundamental reforms, especially in the energy sector to ensure we can see a true adjustment of the curve to its true north.”
Speaking in another TV interview on Monday, Rewane said the policies of the CBN have been yielding positive results, especially in stabilising the naira and improving market efficiency.
Speaking on Arise News Global Business Report, Rewane claimed that although the naira is still undervalued, the CBN’s actions are causing it to progressively approach its true value.
He noted that previously, there were multiple exchange rate windows but the FX Market unification has eliminated that, ensuring price discovery.
According to him, the difference between the parallel and official rates has dropped to about less than 1 percent. “Before it was as much as 10, 15, 20 percent. Now that has been achieved.
“The market and price discovery is efficient. We are no longer saying Aboki FX and blaming all sorts of shadow people. So we have that,” he added.
In an effort to manage the foreign exchange volatility, CBN has in the last 18 months come up with a raft of measures to address that.
In recent months, the value of the naira has increased steadily at a rate of N1500 to the dollar. On Friday, 21 February, it closed at N1,509 at the official market, and at the black market, it gained N45, or 2.0 percent, as the dollar was quoted at N1,510.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
