Stabilising the foreign exchange market in Nigeria has been a running battle since the crash of oil price in 2014. With oil as the major foreign exchange earner of the country, the tumbling of the price of crude oil at the international market had seen the revenue plummet.
The price of crude fell from about $100 per barrel to below $30 per barrel sending oil based economies into crisis. With about 75 per cent of Government revenue comes from crude oil sales, the crash was bad news for the economy.
External reserves declined as the Central Bank of Nigeria worked to support the country, knowing that a decline in the value of the naira would send prices spiraling upwards. The apex bank world to keep both the inflation rate below double digit and the exchange rate stable.
However, as the low oil price wore on, it became evident that the support for the naira would not hold on for much longer as the economy continued to suffer. Nigerians had become accustomed to living on the pleasures of foreign goods and services.
Not only was the country dependent on the importation of fuel, it was dependent on imported food, clothing, appliances, luxury goods and services such that some Nigerians stopped drinking water bottles within the country, preferring to import water from outside the country.
This continued to take its toll in the reserves which had reduced from close to $50 billion to around $35 billion by 2015. To address the challenge of rejuvenating the local industry and conserve the naira, the CBN had in 2015 listed 41 items that were no longer eligible for foreign exchange at the official market where dollar is cheaper.
This move was to ensure that the local economy was brought back to life and the foreign reserves of the country was conserved by not spending on what could have easily being made in Nigeria.
One of such items is rice on which the country spends billions of dollars importing annually. Food items and furniture that could be made within the county were also on the list. Although the removal of these items has seen a revolution in the Nigerian agricultural sector, the idea of not spending scarce foreign exchange on things that could be made in the country still does not sit well with some.
The apex bank had stopped its policy of pegging the value of the naira, allowing a partial floating of the exchange rate, an action which saw the value of the naira plummet to N305 last year at the official market, and N490 at the parallel market. The free floating also saw an inflow of foreign exchange by investors particularly foreign portfolio investors.
Although the drop in the value of the naira had led to cost push inflation as consumer price index rose to 11 year high if 18.55 per cent as at December 2016, the good side of the CBN action alongside its palliative measures of several intervention funds such as the Anchor Borrowers Programme had created employment and growth opportunities In the country.
Despite these, some groups had besieged the apex bank to protest the e onomic condition, laying the blame of the nation’s economic downturn on the CBN. According to several analysts who spoke with Leadership, the Econ y is not hinged only on monetary policy but also fiscal policies.
These policies also must complement each other before the desired change can be effected in any economy. Chief Executive of Afrinvest, Ike Chioke while complementing the steps taken by the CBN in ensuring stability in the financial market and the foreign exchange market, also stressed the need for the fiscal side of the economy to speed up on its polices for the betterment of the economy.
This was also the opinion of analysts at Financial Derivatiess company and Cowry Assets Management who believe that the CBN is stretched to the limits in its policy formulation. They passed the baton of complementing policies to the fiscal authorites which they say have not being fast enough.
Inspite of these, some groups had decided to “occupy CBN” leading protests against the apex bank. Reacting to the various attacks the bank had seen in recent time, actimg Director, Corporate Communications of the CBN in a statement at the weekend said the unwarranted attack on its policies were by a group of Nigerians, whose real interests, findings have shown, are anything near altruistic but rather self-serving and unpatriotic.
“While we respect the rights of every Nigerian or stakeholder to their respective views, we find it curious that certain interests have remained persistent in their move to misinform the larger public, with the intention of discrediting genuine efforts at managing the economy, thereby creating public distrust and panic within the financial system.”
The statement by the ape bank which reaveLed that intelligence reports at its disposal showed that some “ self-centered individuals, who have failed to assail our patriotic position, have resorted to the sponsorship of serial propaganda to misinform and mislead the public on the objectives of our policies.”
These persons it said were funding the push to have the CBN and the Federal Government reverse its foreign exchange policy, which is aimed at conserving foreign exchange, stimulating agriculture and manufacturing and also promoting exports.
The apex bank however reiterated that it will not reverse its policies which are targeted at growing the economy and creating much needed job opportunities as well as playing its part in the diversification of the nation’s economy.
“Our decisions on forex management are prompted by the challenge posed by the level of depletion of the country’s reserves, arising from issues such as a drastic reduction in oil earnings, speculative attacks and round tripping.
“It is pertinent to note that pressures on the country’s foreign reserves have persisted due to a huge fall in the monthly foreign earnings, which fell from over $3.2 billion sometime in 2013 to below $500 million per month sometime in 2016, when the demand for the US dollar, particularly by importers, continued to rise considerably.
In spite of the challenges and the basic economic fact that countries earn dollars from international trade, the apex bank said it had ensured that genuine demand of dollars by importers to pay for eligible imports and other transactions within available resources were met, even as it continued to ensure that there is liquidity and transparency in the forex market.
“For the avoidance of doubt, the CBN continues to ensure that inflation remains within manageable limits; Intervene in critical sectors of the economy, through injection of much-needed capital to promote growth and employment; promote export-driven industrialisation; provide access to credit to farmers and small scale entrepreneurs at single digit rates, to create wealth; protect the interest of Bank customers in Nigeria; and above all, ensure that the masses of our country’s low income earners are protected from the vagaries of high naira depreciation.”