Business
By Anayo Ezugwu
THE Central Bank of Nigeria, CBN’s, aggressive interventions in the foreign exchange market, has continued to enjoy supports from economic experts in the country. Adedoyin Salami, economist and senior lecturer, Lagos Business School, is one of those economists who are happy with the CBN’s interventions.
According to Salami, the CBN intervenes in the FOREX market because the law empowers the apex bank to do so. Speaking at the March 2018 breakfast meeting organised by the Nigerian-American Chamber of Commerce, NACC, on Wednesday, March 28, he said the CBN act empowers it to control the monetary policy in a particular way that suits the country.
He said everywhere in the world the central banks intervenes. He said even in the United States, the US treasury intervenes. Salami, who spoke on the topic: ‘From recession to election: The Nigerian economy and business environment,’ said there is no country in the world where the central bank leaves its currency to the free flow of market indices.
“So, to say that the Nigerian CBN is intervening, yes it is within their powers. To me that is not a problem. But in the Investors and Exporters, I and E window that I can understand because it is beyond our control,” he said.
According to Salami, the CBN is comfortably intervening in the FOREX market because the reserves have risen. He noted that in the last few months the reserves increased because of some environmental factors, such as oil prices. He stated that oil prices had doubled since it dropped between $27 and $32 per barrel.
He said Nigeria came out of recession because of the increase in oil price and oil production. “Oil production has increased by 26 percent in the last a year and half. Like I said you have seen what price and production have done.
“Another factor that is encouraging CBN to continually intervene in the FOREX market is the capital inflows. Three years ago Nigeria was doing $20 billion on capital inflow annually and thinking nothing of it. Today we are doing $9 billion but it is better than when we were doing $5 billion.
“But the borrowing of the federal government is not to be discounted. $3.5 billion was what we borrowed in May last year. First quarter of this year we are taking another $2.5 billion. This is about $6 billion of borrowing. Then the Nigerian banks have been accessing the Eurobond market for years. So that is not nothing new.
Chief Olabintan Famutimi, President, Nigerian-American Chamber of Commerce and Dr. Adedoyin Salami, Guest Speaker, Economist, Associate Professor, Lagos Business School, Past Member, CBN Monetary Policy Committe and FGN’s Economic Management Team
“For me I have highlighted four different reasons why reserves are rising. Not, you can say you don’t like some of them, but my job is to explain to you why the reserves are rising. The rising reserves have put the CBN in a position between now and the end of the elections to keep the economy in a stable position. And that is what businesses in the country want,” he said.
In last 13 months, the CBN has injected a total of $18.067 billion into the interbank segment of the foreign exchange market since it started its intervention into the market in February 2017. According to the weekly foreign exchange, FOREX, sales by the CBN between February 21, 2017, and March 23, 2018, the CBN sold dollar to authorised dealers in a total of 76 sessions.
A breakdown of the dollar sales showed that in 2017 alone, the bank intervened with a total of $15.043 billion. Also, between January 12 and March 23, 2018, it has offered a total of $3.024 billion through wholesale forwards and retail Secondary Market Intervention Sales, SMIS.
– Mar. 30, 2018 @ 14:12 GMT |
Tags: @cenbank @naccng Why CBN has sustained FOREX intervention – Salami
