…Call for urgent CBN intervention
Some experts and analysts in the nation’s financial sector have said that the foreign exchange market is polluted and needs urgent intervention from the Central Bank of Nigeria. They urged the apex bank to inject funds into the market consistently, if stability is expected in that segment.
Managing Director, Financial Derivatives Company Limited, Mr. Bismark Rewane, predicted that the naira will depreciate from N480 to N520 to the dollar in the parallel market, as attempts to use forwards contracts to stabilise the market will be futile, adding that the stock market will trade flat to negative again in February, as more surprising negative results will be announced in March by most quoted companies and banks.
Chief Executive Officer, Skyview Investment, Mr. Emmanuel Adekoya, explained that the current demand for the greenback outstripped its supply at the foreign exchange market.
“Leaving the exchange rate completely at the mercy of the forces of demand and supply could be counterproductive on the long run,” he said. He lamented that the re-modeling of the floating single foreign exchange policy has not really changed anything in the economy.
“Now look at the stock market, it has not picked up. One would think that with the new economic policy, foreign investors would begin to embrace the capital market.
The economy is collapsed already, because people are suffering,” he said. Another investment analyst, Mr. Emmanuel Oloja, said forex policies usually complement trade and investment policies, advising that the Nigerian government should, in 2017, strive towards greater coordination of these policies, and make move from its current bias for a command economic monetary policy towards a mixed economy.
He said the Federal Government should be careful in policy inconsistency. He added, “You don’t use a country as big as Nigeria to test run a policy. The market is lopsided and the demand for the dollar is far more than its supply.
No economy can leave its exchange rate totally to the market forces. The challenges in the global oil market, fueled by low oil prices had translated to a drop in the foreign exchange accruable to the nation from the sale of crude oil.
“I believe that with oil prices at $55 per barrel and production back up to two million barrels per day, the naira will slip in the interbank markets to N350-N380/$.
It will fall in the parallel market to N520/$ before recovering sharply to N425/$. These projections are based on the assumption that the market will be reformed and that sanity will return to what is now essentially a foreign exchange asylum.”
However, Deputy Director of Communications, CBN, Mr. Isaac Okoroafor, said there was no reasonable justification to allow the naira to float in the market, given that Nigeria is mainly an import dependent nation.
He explained that the current high level of inflation in the economy was mainly imported as a result of naira depreciation and that the situation would escalate further should the CBN allow further depreciation.
