CBN may release Forex to check Naira slide
By Patience Ikpeme
The Central Bank of Nigeria (CBN) may inject a significant amount of foreign exchange (Forex) into the market to stabilize the Naira.
A board member of the CBN who gave this hint emphasized that “interventions in the foreign exchange market have been routine over the years, and it is desirable to use reserves to stabilize the Naira”.
To prevent further depreciation of the Naira, the board member suggested flooding the market with foreign exchange.
He also believes that demand management policies are necessary to address the overwhelming demand for foreign exchange.
In addition, Professor Uche Uwaleke, Director Institute of Capital Market Studies, Nasarawa State University Keffi suggested increasing crude oil production and tackling oil theft to earn more Forex, which can then be used by the CBN to stabilize the forex market.
He advised against seeking a bailout from the International Monetary Fund (IMF) as a short-term solution.
Uwaleke also called for the setup of a Fiscal and Monetary policies coordination committee to review the CBN’s RT200 program.
The committee he said should collaborate with fiscal authorities to ensure its successful implementation.
Prof. Uwaleke emphasized the need to control rising inflation and invest in productive activities to address supply-side induced inflation and stabilize the Naira.
In the medium term, he advised the authorities to engage in productive investments to curb inflation and ease of doing business to attract capital inflows and stabilize the FX market.
Dr. Victor Adoji a market, economic and context analyst and a former banker argued that the free fall of the Naira against the Dollar is due to the high demand for Forex compared to supply.
To mitigate heavy usage of dollars, the system of buying dollar remittances at a fixed rate should be said should be reviewed, and government administrators must identify and mitigate problematic areas that consume a high volume of dollars.
Adoji proposed solutions to the crisis bedeviling the Naira include: housekeeping measures for government administrators; identifying areas of heavy Forex usage; and a programme to return value to the Naira in the short, medium, and long term.
