Not long after the Muhammadu Buhari administration came into power, youth restiveness in the Niger Delta led to a decline in oil production and the accompanying fall in the nation’s earnings from the sector which has remained the main stay of the economy. It was no surprise then that foreign reserves plummeted leading to a drastic fall in the value of the Naira against other major currencies especially the United States dollar. Distributing the limited foreign exchange among the critical sectors of the economy became a delicate balancing act on the part of the Central Bank of Nigeria (CBN) and, in particular the Governor, Mr Godwin Emefiele.
The situation posed a huge challenge to the management of the apex bank. The Governor himself was, literally, in the eye of the storm as demands for foreign exchange kept rising even as the supply side of the hard currency remained static at best. It was at this point that he decided to expand his mandate beyond monetary policy formulation and financial system stability into areas he hoped will diversify the economy so as to lessen the pressure. This included his foray into agriculture, agri-business and agri- processing. Through this policy, the Anchor Borrowers Scheme, for instance, that backed small holder rice growers without abandoning the large scale producers, came on stream and with it the rice revolution.
The idea was and still is to reduce, if not eliminate, rice importation that was a major drain on the scarce foreign exchange. Commerce also got a sharp cut from the Emefiele scalpel when he put 41 inessential items on the import prohibition list. They were not altogether banned from being imported. The policy thrust defined those items like took pick, apple and others in that category which have local substitution as not urgently needed as to receive official foreign exchange allocation. That decision, in particular, could only have been taken by a CBN governor willing to stand up to the courage of his convictions in a determined effort to manage a currency that was battling to hold its value. Of course, there were barbs from all sides but he stayed his course.
As this tasking battle to save the Naira progressed, its value vis-à-vis other currencies took a near fatal beating as it went down to N520 to the US dollar no thanks to the unpatriotic activity of speculators most of whom resorted to round tripping that further did damage to the nation’s currency. Notwithstanding, Emefiele remained resolute in his determination to win the game against those who saw the scenario as lucrative and a life time opportunity to make the kill. His application of the most intricate modules available in monetary policy formulation and implementation came in sync with the federal government’s measures to calm frayed nerves in the Niger Delta using the carrot and the stick. It worked as daily production improved and foreign exchange supplies rebounded offering a breathing space and a chance to the CBN to confront the saboteurs head on in a real battle of wits.
While this was on, he was conscious of the effect of any measure to be applied on the economy. He carried the major stakeholders- deposit money banks (DMBs) and bureaux de exchange along in the drive to satisfy all demands for foreign exchange. Through this dexterity and display of skill and tact, he has been able to bring the exchange rate to what it is today N360 to the dollar, a huge revamping move that is unprecedented anywhere else in the world. It was a feat achieved by the Central Bank of Nigeria under Emefiele as a result of a painstaking study of the forex market in Nigeria and even globally.
Reports across markets indicate that the apex bank’s long-haul strategy is having a sustained positive result particularly in the areas of foreign exchange market and the external sector. The CBN’s management of the crisis situation and the eventual huge foreign exchange resource deployment to counter speculators in the Nigerian currency market is lifting the economy from recession as external reserves reaches a high of more than USD30.1 billion, indicating a new threshold in the external sector strategy.
It is pertinent to point out, in our opinion, that in fighting to save the local currency from speculative attacks, Emefiele adopted a policy strategy of funding the commercial banks with enough forex to cater for the request of customers to meet personal travelling allowance (PTA), basic travelling allowance (BTA), medicals and tuition fees. With a willingness, capability, and determination to meet forex demand in the market, in our view, the CBN is restoring the value, pride and integrity of the local currency. A miracle indeed.
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