Economic and financial experts, including the Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, on Tuesday described the recent modification to the foreign exchange policy by the Central Bank of Nigeria as a step in the right direction.
They argued that if the CBN sustained the reform through steady supply of forex into the market, the huge gap between the exchange rates on the parallel and official markets would be reduced in no distance time.
This, according to them, will put an end to round-tripping, stabilise the exchange rate and attract foreign investors into the economy.
They spoke in separate interviews with our correspondent.
Reacting to the adjusted policy measure, Rewane said, “We expect the CBN to sustain the process. We have seen improvement in the forex market since the introduction of the new measures a week ago. The naira has been strengthened; it has gained about 13 per cent to 15 per cent. The CBN has to be consistent with the supply.”
The CBN had last Monday announced a new forex policy aimed at boosting forex supply into the market. The apex bank has released $780m into the market in the past one week and this has strengthened the naira from 520/dollar to 455/dollar.
The regulator also promised to sell $1m to 21 commercial banks in the country on weekly basis. This, according to the CBN, will enable the banks to sell forex to end-users, especially for the payment of school fees and medical bills abroad as well as personal travel allowances.
Rewane, however, advised the CBN that beyond extending forex supply to invisibles trades, it should boost forex supply to visible transactions.
“The CBN needs to boost supply by at least $400m or $500m to tradeables, i.e. raw materials etc. Beyond the invisible trades, the central bank needs to extend supply to the tradeables too. All these measures will help to narrow the gap between the official and parallel market, stop round-tripping and attract foreign investors,” he stated.
However, some analysts have accused the CBN of using the external reserves to defend the naira. But Rewane said “the CBN is doing the right thing.”
“But the CBN needs to move the official rate from where it is now. N305 to a dollar is not a realistic rate. This will help to bridge the gap,” he added.
Corroborating this view, economic expert and Head, Research and Investment, SCM, Mr. Sewa Wusu, said the new measure introduced by the CBN had made positive impact on the forex market in the past one week.
“The market has always been clamouring for transparency in the manner the CBN allocates forex in the market. It is a well-thought-out policy. We could see the immediate effect on the parallel market; the naira has been strengthened,” he added.
On the criticism that the CBN was using the external reserves to defend the currency, Wusu stated, “That is part of what the external reserves are meant for; they are meant to support the naira. We cannot say the new policy measure is not good.
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