The long battle to give the naira its value against major international currencies appears to be yielding results following recent developments and schemes orchestrated by the Central Bank of Nigeria (CBN).
Having been on the downward swing for months, and even getting financial experts confused with some predicting it would hit over N600 to the dollar in no time, it was no longer clear if the CBN had an immediate remedy to salvage the situation.
Even with some experts urging the bank to drop the adopted flexible exchange rate by allowing the naira float or face outright devaluation, the apex bank stuck to its guns in its drive to ensure palpably stable currency.
The crises responsible for the slump were obvious even to those who criticised government for the dwindling fortune of the currency. From depletion of foreign reserves by previous administration, drop in oil price at the international market and attacks on oil facilities by militants, nothing worse could have been expected.
Being an import dependent country, the outcry against the CBN from so many quarters was understandable as manufacturers needed to urgently process letters of credit while those schooling overseas as well as those needing medical attention could no longer access forex at reasonable rates.
In recent weeks, however, the apex bank unleashed wits, which have seen the foreign exchange situation beginning to glide in favour of the naira with the last exchange rate pegging at N385 to the green back from over N500 at the parallel market while official rate remains N305.
CBN, in no time, has confounded whatever strategy deployed by parallel market operators to steel the transaction to their advantage. The situation has always been compounded with speculators mopping up forex from all corners of the country and subsequently hoarding it to give a semblance of scarcity.
The trick, however, has not cowed the apex bank as the CBN Governor, Godwin Emefiele, has continually reinforced its position to ensure such speculators run into loss.
So far, the new forex order has attracted commendations from Nigerians including its most ardent critics. It is the manufacturers’ belief that when forex is available, it will enable them to open letters of credit and begin production in full as ease of raw material importation becomes commonplace.
Part of the stratagems that have seen the naira appreciate steadily in weeks was the February mediation when the apex bank carried out wholesale interventions in the interbank foreign exchange market by providing $370.9 million to 23 banks to meet the visible and invisible requests by customers.
The strategy was aimed at easing the pressure of access to foreign exchange by Nigerians. Although it originally offered $500 million for sale to the banks, not all of them provided enough naira backing to pay fully for their respective bid amounts.
In all, seven banks received full allotments of their respective bids valued at $37.5 million each, while other banks received allotments ranging from $15.57 million to $46.512 million.
With such huge support coming for the interbank foreign exchange market, it was least expected for the gains at the parallel market would be sustained for long.
Not done with the multiple forex injection in the first instance, the apex bank went ahead to throw up some policies that have further made access to foreign exchange as easy as it should be by providing direct additional funding to banks to meet the needs of Nigerians for personal and business travels, medical needs and school fees with the retail transactions settled at a rate not exceeding 20 per cent above the interbank market rate.
Also very significant in this direction is the increase in the availability of foreign exchange to all end-users by significantly reducing the tenor of its forward sales from the current maximum cycle of 180 days to no more than 60 days from the date of transaction as well as the directive to all banks to open forex retail outlets at major airports.
Among other steps so far deserving of commendation are the apex bank’s plan to clear all unfilled orders with provision of forex to the manufacturing sector remaining a strong priority and zero allocation/utilisation rules on commercial banks as well as implementing an effective intervention programme to support the interbank market to ensure adequate forex liquidity.
Now that things appear to be looking up for the naira, we advise the CBN to keep up the tempo by ensuring that those who are in genuine need of forex access it easily and timely.
It is also very important to ensure that Bureau de Change (BDC) operators are closely monitored to ensure they do not sabotage the current arrangement that is giving a breather to the local currency.
While we commend the CBN for the grounds so far cleared, we are also mindful of the fact that the current state of the naira is predicated on the fall in oil price at the international market; and as such, the apex bank should not be carried away by the current conquest but should rather strategise more to ensure some degree of stability for the currency over a long period of time.