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Ever since the Central Bank of Nigeria (CBN) started its almost daily intervention in forex liquidity, many pundits have continued to argue that the practice remained cosmetic and may not do the magic of forex stability.
The naira weakened to 410 per dollar against the United States currency on Tuesday, down from 405/dollar recorded on Monday.
This was despite the Central Bank of Nigeria’s attempt to improve dollar supply and prop up the local unit.
In an interview, Dr. Ken Igboanugo explained that “Thinking that what the CBN is doing by injecting dollar to the market will stabilize naira value remains a wide goose chase as there are other key factors that drive currency stability other than dollar injection”.
He said “CBN got it monumentally wrong when it first shutout manufacturers in the basket of forex access, thereby creating a production gap which cannot be easily be covered in a short time in the manufacturing sector.”
“The factors that will drive the sustainable stability of naira cannot be too far from increased manufacturing output which would have come if CBN had granted easy access to forex to manufacturers when they were clamouring bitterly for it earlier in the first quarter.
“Today, several production lines have shut down due to forex poor access, thus cutting short expanded access to earnings from non-oil exports which the same government is claiming to be promoting.
Dr. Igboanugo made it clear that the best bet for the monetary policy makers in the country now is to come up with changes that will ginger massive industrial output to drive exports from where the country can earn more foreign reserve glut than drying up available ones from oil in the name of intervention.
He decried the rising number of companies that have either closed shops or ran out of the country because the forex crisis since the last quarter of 2016 till date.
Business Hilights recalls that the apex bank had on Monday this week auctioned $100m in forwards to be settled between one week and 30 days’ time, as against 60-day contracts it had written previously, shortening the settlement period on forward contracts to inject liquidity.