CBN’s forex intervention unsustainable, experts argue

•  Will breed another FX traders

By Odunewu Segun

In the last three months, the Central Bank of Nigeria has pumped over $4bn into the forex market in a desperate bid to rescue the naira. But there are concerns in some quarters that such a measure is not just sustainable but poses serious threat to the nation’s foreign reserves.

Although the intervention has saw the naira appreciated from the over N500 recorded in December 2016 to less than N400 since the new policy was introduced. Stakeholders still expressed worry over the current foreign exchange policy, which in their opinion is a smokescreen.

Alhaji Aminu Gwadabe, President of the Association of Bureau De Change Operators of Nigeria (ABCON) said the new forex policy will breed a new set of currency traders.

The ABCON boss noted that the directive by the CBN to commercial banks to sell dollars for school fees and medicals will “breed another FX traders between the banks and the end users.”

Speaking in a monitored television magazine programme, former CBN Deputy Governor, Dr. Obadiah Mailafia, said that some analysts had advised the government to change the new policy in order not to deplete the country’s external reserve.

He said the CBN cannot continue to do this forever without depleting the external reserves; “if you deplete the external reserves, in fact, the naira can fall to 1,000 to a dollar,” he added

“We should have a deliberate policy of working toward unification and integration of multiple exchange rates into the law of one price, so that there will be clear transparency in the system.”

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Echoing similar sentiments, Managing Director/CEO of Maxifund Investments and Securities Plc, Mazi Okechukwu Unegbu, commended the CBN for its concerted efforts at stemming the down ward slide of the naira, but said the intervention is not sustainable in a very long time.

Like Unegbu, Dr. Bongo Adi, senior lecturer in Development Economics, at the Lagos Business School, Pan Atlantic University, also holds the view and very strongly too that the response of the CBN to the forex conundrum is not a technically appropriate one, especially when considered in the long term perspective.

The CBN had in February announced a FX policy measures by the commencement of dollar sales for personal and business travel allowances as well as foreign education and medical fees.

Not done with its new policy stance, the CBN opened a window for SMES to obtain $20,000 per quarter directly and then last week or so, the CBN opened the new forex window- the Import, Export and Investor window. Here the naira is finally allowed to float.

According to the CBN, the essence of the new policy is to infuse dollar liquidity into the system and also to ensure easy accessibility of end users.