Emmanuel OchayiIn its half-year financial markets report, the Central Bank of Nigeria (CBN) revealed that it has maintained efforts to alleviate demand pressures and ensure exchange rate stability.
Mr. Fola Shonubi, the then acting governor of the Central Bank of Nigeria highlighted the ongoing challenges and announced new policies to address the FX market’s dynamics.
Directly addressing the issue, Shonubi stated, “We have always argued that while we believe the unification of the various FX rates is a pro-market policy that will be positive for the economy in the long term, the short to medium-term impact will be hard on the average consumer. A focus on rate convergence without structural reforms to increase the supply of FX will be a case of treating the symptoms while ignoring the underlying cause of the problem, which is an acute shortage of supply amidst a growing demand for FX.”
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This announcement comes as the Naira continues to depreciate against the US dollar, raising concerns in the market. The financial report disclosed that a total of US$6,439.33 million was sold at the foreign exchange market in the first half of 2023, with spot and forward sales contributing to this figure.
The Naira’s depreciation has been more pronounced at the parallel market, reaching N1020/US$ on October 10, 2023, due to the shocks of the policy.
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The report also pointed out that two major sources of foreign exchange, crude oil sales, and Foreign Portfolio Investments (FPIs), have seen declines. Oil production remains depressed at 1.57 million barrels per day in September, with limited foreign capital inflows to counteract the FX challenges.
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