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OPS sees CBN sustaining naira gains on rising foreign reserve, over subscribed $1bn Eurobond - BUSINESSDAY

MARCH 04, 2017

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BY HARRISON EDEH, ABUJA

Key members of the Organised Private Sector, (OPS) say that the Central Bank’s dollar interventions to ease pressure on the naira could be sustained, especially with the level of stability in the nation’s foreign reserve put at $29.032bn at last Thursday.

They are also optimistic that Nigeria’s recent recorded success in its oversubscribed $1billion Eurobond‎ could also help in sustaining the apex bank’s dollar interventions.

‎The new CBN policy on dollar intervention is a move aimed at easing access to foreign exchange by Nigerians, as well as promote a more efficient and competitive foreign market which has seen more interventions to those seeking medical attention, payment of school fees and those travelling outside the country.

Tony Ejinkonye, the President of  the Abuja Chamber of Commerce and Industry, told BusinessDay that the CBN’s intervention so far, is proving to be a solution to the scarcity of foreign exchange that has persisted for several months before now.

Ejikonye said, “The new policy may be sustainable because the country’s foreign reserve has been on the increase lately, and it is still basking in the success of an oversubscribed $1billion Eurobond.”

“Consequent upon the success of $1 billion Eurobond, Acting President Yemi Osinbajo, according to media reports, has already written to the National Assembly requesting permission to float another $500 million Eurobond.

Ejinkonye argued further that so long as there is ‎a continuous in-flow of foreign exchange, the inaccessibility of foreign exchange for raw material and industrial purposes by the organised private sector would be a thing of the past.

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Giving further insight to the CBN’s priortisation of forex to the real sector, Ejinkonye said, “Although the preferential treatment which required treatment, which required banks to allocate 60 percent of the foreign exchange purchases from all sources to the manufacturing sector, has been eliminated, the sector still remains its strong priority”
The CBN recently relaxed its foreign exchange rules to ease stifling FX supply and tame wide speculations and immense pressure on the naira.
In a set of new policy rules, the CBN said it will no longer impose FX allocation/utilisation rules on commercial banks, and will immediately begin to provide direct additional funding to banks for Personal and Business Travel, Medical needs, and School fees.
Since then, the apex bank has intervened three times in the market, with close to $700m dollars, which saw the naira  strengthen on the parallel market earlier in the week to N435/$ as against well over N500/$ before the new policy.
The CBN said last week that the real reasons behind recent aggressive appreciation of the naira was due to its decision to cut out massive bait on the local currency, as well as recent interventions which created a dollar glut in the market.
“We have decided to do the intervention at this time because there is so much bubble and we are a bit more comfortable to now tackle that with the set of rules and dollar sales. The market has reacted positively and the naira started gaining strength,” said CBN acting spokesperson, Isaac Okorafor.
Frank Jacobs, President of the Manufacturers Association of Nigeria, MAN also expressed optimism that the CBN forex intervention could be sustained with the recent 2.1 million barrel per day production of oil, and the gradual increase in the foreign reserve.

“The price of the crude oil is rising in the global market, and the Acting President has been brokering a peace deal in Niger-Delta, which has been yielding appreciating results, seen in the increase of barrels of oil production.

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“The CBN’s ‎ intervention in the Forex liquidity market could be sustained, but based only on these parameters. If the CBN continues to fund the Forex market, it is the best for the naira. But if they don’t, I have my fears that the naira could still fall steeply,” Frank Jacobs said.

Nevertheless, experts in the real sector had also called on the Federal Government to take advantage of its bilateral trade agreements and attract more companies into the Nigerian economy, which would assist in easing pressure on the naira as the industries produce locally.

“Now that there ‎is a ban on 41 items, the government should look beyond the CBN’s interventions and ensure that through its bilateral discussions, they attract more companies and industries, mainly from where Nigerians spend huge amounts of forex to import,” Adamu Saliu,  director-general of Niger State Chamber of Commerce and Industry told BusinessDay exclusively.

‎He insists that the government must ensure its bilateral trade relations must encourage industries where Nigerians import heavily, to domicile in Nigeria, to ease the pressure on foreign exchange and even avoid smuggling of such goods.

“Even if we intervene with all the money in the foreign reserve, it would not still be enough, because of appetite for imported goods by most Nigerians. We must find a way to encourage local production and backward integrate accordingly, “he added.

Analysts have also ‎insisted that for Nigeria to come out of the recession, a more comprehensive policy that would rejig the economy and pull it out of recession would be better off, rather than leaving the entire economy on volatility of oil prices in the international market, without any conscious effort to diversify the economy.

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