If up to $9bn interventions since February can’t converge rates, then…
As the endless wait for all market exchange rates to converge since February this year seems not to be working 10 months after; analysts have started raising issues on the need for the Central Bank of Nigeria (CBN) to change tactics.
It would be recalled that the apex bank had came up with the not too popular safety model of momentary dollar injection, rather than outright allowance of market forces to determine the value of naira. The dollar injections were made to enable stakeholders secure enough forex for their operations, and in the process boost naira’s stability.
However, some market watchers are upbeat that dollar injections into the economy estimated at $9 billion since February have helped the CBN achieve long-term naira stability and curb volatility in the foreign exchange (forex) market.
No doubt, the CBN has, in the last nine months, sustained its weekly dollar interventions in the forex market; a large part of it goes into the interbank market, bureau de change (BDCs), Retail Secondary Market Intervention Sales (SMIS) and wholesale spot.
Even though the gap between official and black market rates started to shrink since February 20, when the CBN resumed dollar interventions in key segments of the economy, pundits are not so happy on the endless wait for the targeted convergence of the raters.
To them, the only strategy that can effect the desired rates convergence as it is done in other climes is allowing the naira to find its level in the comity of currencies.
This can be possible if the real sector is provided with the needed infrastructure to remain afloat and government fiscal policies are seen to become stable.
In his recent defence of the ongoing weekly dollar rain, the CBN’s Deputy Governor, Financial System Stability, Dr. Joseph Nnanna, said the introduction of the Investors’ & Exporters’ (I&E) Forex Window was targeted at increasing forex supply; and allowing the timely settlement of transactions helped to achieve the current exchange rate. He said over $10 billion has been attracted to the economy through the I&E Forex window, adding that the window’s success rate exceeded stakeholders’ expectations.
Still yet, the dichotomy of purpose between the CBN and market watchers on why the naira should be left to find its level has continued to veil the devaluation of the naira for a long time.
Observers say, time has come for the apex bank to give up waiting game as inability to resolve the currency puzzle is hobbling decision making mechanism of several international investors.
