Emmanuel Ochayi
CBN’s Macroeconomic Outlook
The Central Bank of Nigeria (CBN) has highlighted the crucial role of increased crude oil production and exports in strengthening the naira.
In its latest report, “Macroeconomic Outlook: Price Discovery for Economic Stabilisation,” the CBN emphasised the potential for domestic crude oil production to stabilise the exchange rate.
Join our WhatsApp Channel“The expected rise in crude oil export receipts would provide further impetus to the market, moderate depreciation pressures, and strengthen the naira,” stated the CBN in its debut outlook.
CBN’s Role in Stabilising the Exchange Rate
Nigeria’s apex bank pointed out that improved investor confidence and higher remittances, stemming from recent foreign exchange market reforms, are also expected to help stabilise the naira.
“The outlook for the Nigerian economy indicates broad resilience, with continued growth, expected moderation of inflation, and greater exchange rate stability,” the report noted.
The CBN further explained that the domestic production and refining capacity of crude oil, alongside the anticipated rise in crude oil prices, could boost economic growth to 3.38% in 2024 from 2.74% in 2023.
READ ALSO: Forex Crisis: CBN Sells $122.67m To 46 Authorised BDC Operators
Challenges in Oil Production
Despite the positive outlook, Nigeria has consistently failed to meet the Organisation of Petroleum Exporting Countries (OPEC) production quota of 1.5 million barrels per day and its budget target of 1.78 million barrels per day.
In June, the country’s average daily crude oil production was 1.276 million barrels per day.
Policy Reforms and Market Interventions
The central bank has implemented various reforms to enhance efficiency and transparency in the foreign exchange market.
These policies have narrowed the gap between the Bureaux de Change (BDC) and the Nigerian Autonomous Foreign Exchange Market (NAFEM) rates, contributing to exchange rate stability.
PwC, a professional advisory firm, commented on the CBN’s efforts, saying, “Interventions by CBN may cause the naira to stabilise in the long-term.
However, these interventions may become subdued in the absence of improved capital flows and export proceeds to the foreign reserves.”
CBN’s Forex Market Interventions
Last week, the CBN announced that it had sold $122.67 million to 46 authorised dealers to promote stability and reduce market volatility.
However, this intervention has yet to significantly strengthen the naira, which was trading at N581.65 per US dollar in the official market on Thursday, while edging towards N650 in the parallel market.
Sustained Efforts for Stability
The CBN reiterated its commitment to maintaining a market-based approach to ensure price discovery, transparency, efficiency, and stability in the foreign exchange market.
“We will sustain the willing-buyer and willing-seller market-based approach, among other policy measures,” said a CBN spokesperson.
Future Outlook
The CBN’s outlook underscores the importance of continued improvements in oil production and market reforms.
With these measures, the bank aims to stabilise the naira and support Nigeria’s economic growth.
