The clearing of backlog foreign exchange (Forex) and the stabilisation of the national currency, Naira, have put Nigeria’s economy on the threshold of capacity optimization.
This was the conclusion of the research of a top Nigeria’s Think-Tank, the Independent Media and Policy Initiative (IMPI), which on Wednesday in Abuja the latest sale of dollar to Bureau de Change at the rate of N1,251/$ was an indication of the effective rate in the forex market.
“The for us, it signposts the possibility of increased value of the Naira over the next few months,’’ Mr Niyi Akinsiju, the Chairman of IMPI, said in a policy statement.
“As the Central Bank of Nigeria (CBN) adeptly leads the country through the equivalent of an economic minefield, it is instructive to note that the country’s policy makers in both the fiscal and monetary spheres determinedly asserted on orthodox modelling for which it has been hailed across the globe,’’ he said.
He described the rate with which the Naira is appreciating as a reflection of the bouquet of positive policies introduced by the Nigerian authorities and the CBN.
He argued that the government and the CBN deserved commendation for the policies that were addressing the supply and demand sides of the foreign exchange market.
IMPI acknowledged that the resurgence of Naira in the forex market was as a result of CBN’s directive to banks on Net Open Position (NOP) as well as the clearing of the more than $7 billion foreign exchange backlog due to foreign investors.
It also cited CBN’s new status as the official revenue collection entity of the Nigeria National Petroleum Corporation Limited (NNPCL) and concluded that the country’s monetary and fiscal policy authority have done a good job.
The Think-tank added that the sale of dollars to BDCs at the rate of N1,251/$ is a clear indication of the possibility of increased value of the naira over the next few months.
“The standards economic features of a country transiting from a managed foreign exchanged float (a regime where the government determines and set the rate at which its currency is bought or sold against other currencies) is that the adjustment is never easy.
“There is clearly a period where things get worse. This is especially the case as soaring import costs spur inflation and make lives harder for citizens of the country and for these reasons, the policy is associated with inflicting economic pains on the poor of a country.
This is why many central banks are reluctant to let the exchange rate fluctuate, a phenomenon known as “fear of floating.”
The CBN in series of policies discouraged the dollarization of the economy, another phrase for currency substitution.
Ordinarily, citizens of a country should not see the dollar or any foreign currency for that matter except when travelling out of their country, IMPI noted.
It said that before the coming of the new CBN governor, Olayemi Cardoso, CBN, most times, the banks were the ones who connect a recipient of international money transfer with the person who will change the dollar.
“Our evaluation of the market indicates that the dollar payment was one of the reasons there was a huge disparity between the official and black market.
If there is no supply to the black market, there will just be a single rate for the dollar.’’