Victor EzejaThe clearing of foreign exchange backlogs by the Central Bank of Nigeria (CBN) and the appreciation of the value of the naira in the forex market has cast an air of delight in the financial landscape, however, an economic expert believes that the development does not yet call for celebration.
On Wednesday, the naira closed trading at N1,410 at the parallel market and N1,492 at the official Nigerian Autonomous Exchange Market (NAFEM), according to data published by the FMDQ Securities Exchange. The gain recorded at official market represents an appreciation of N68 or 4.5 per cent from the N1,560/$1 recorded on Tuesday at NAFEM. At the parallel market, the local currency gained N190 representing 13.5 per cent.
News of the naira appreciation came at the same time, the CBN announced that it has finally settled all valid foreign exchange backlogs, fulfilling a promise made by the governor, Olayemi Cardoso, to process and clear an inherited backlog of $7 billion in claims.
READ ALSO: CBN Clears $7bn Forex Backlog, Boosting Economic Confidence
Prime Business Africa observes that naira has been gaining in exchange rate lately. Observers say it is because currency speculators have begun to dump their dollar stocks, following waning demand by prospective buyers amid CBN clampdowns.
However, former Chief Economist at Zenith Bank, Marcel Okeke, said the recent appreciation of the naira is not yet a cause for merry when compared to what the rate was before devaluation took place about nine months ago.
He said that for the naira to have crashed reaching almost N2,000 before coming down is a call for worry and if it has now appreciated to about N1,500 or N1,600, “it is not yet time for celebration,” adding that all hands must be on deck in applying apt measures to see the naira value appreciate more.
“We have to keep our fingers crossed and keep praying that it keeps coming down because we know where we were, as at the end of May 2023 and where we are now, and then how much havoc the volatility has caused this economy, at individual, family and business and government levels. So, It’s so early for anybody to begin to celebrate when naira comes to N1,500 or N1,600 and all that,” Okeke, who appeared on Channels Television Sunrise Daily on Thursday said.
He stressed the need for sustainability of supply in terms of increasing the volume of forex being supplied to the market. He also urged the CBN to come up with policies and actions to deal with those who are causing problem in the forex market and the economy in general.
He hailed CBN for discovering the activities of Binance that affect the value of the naira, and urged it to do more in regulating and supervising such platforms to prevent illegal practices that affect the of the naira to have a stable forex market.
According to him, having a stable forex market would help businesses to have confidence when making plans. He said the volatility in the forex market in Nigeria has been a source of worry to businesses and investors and they would like to see it resolved.
Commenting on the forex backlogs that CBN said it has cleared, Mr Okeke, said the apex bank should tell Nigerians how it was able to source FX used in settling it.
He contended that there has been scarcity of forex and that if the CBN borrowed to settle the backlogs, the public should know for the sake of credibility and transparency.
He further asserted that clearing of forex backlog does not in anyway reduce pressure on forex.
The economic expert also stated that the recent appreciation of the naira against the dollar can’t be attributed to the recent monetary policies, adding that the hike of MPR by 400 basis points from 18.75 per cent to 22.75 per cent last month has increased banks’ lending interest rates and that’s not good for businesses that have access to credit.
According to him, if a business borrows money from a bank at the current interest rate, and factor it into the cost of production, the cost of their products would be higher and would not do well in competition with goods imported that were produced at a cheaper rate.
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He said Nigeria direly needs investment inflow so that productivity will increase in the economy which will also address the challenge of inflation.
In order to compliment efforts from the monetary side, Mr Okeke said the government on the fiscal side must be working in tandem with the monetary authorities for inflation to be effectively tackled. He pointed out that going ahead to raise the MPR during the next Monetary Policy Committee will have no effect in fighting inflation.
He also urged the government to decisively deal with the issue of insecurity which is still accounting for oil theft in oil-producing communities and low agricultural productivity in farming areas.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
