The strident calls by the IMF and some foreign interest for Nigeria to devalue its currency and the artificial spike in forex rate created by Bureau De Change operators appears to have tanked. This has been linked to a complex and integrated currency management approaches deployed by the Central Bank of Nigeria (CBN).
According to a top source in the apex Bank, “The aim of CBN is to ensure that the divergence between the official and parallel rate does not exceed N3, so we are looking at a parallel market rate of N200/$ because the downward trend in the pressure on the naira will be sustained.”
“The CBN has the capacity to sustain the downward pressure and will deploy further currency management initiatives, while capitalising on fiscal policies of the federal government to remain in support of non-devaluation of the Naira. The current stand of the federal government on Nigeria’s legal tender is Non-Devaluation. It will be unwise for anybody to be hoarding dollars because we can assure you that Naira appreciation is going to trend upwards going forward.”
So far, the CBN in a bid to manage the pressure on supply has deployed over $11.7billion to support Agricultural Sector, SMEs, manufacturers and others. This has reduced patronage of black market by end-users and has forced rent seekers to dump the greenback thereby creating a dollar-glut in the black-market.
The source noted that it has been observed that most of the imports that were draining forex resources have since found local substitutes with attendant savings in forex and shortage of demand for the greenback, which was fuelling the pressure, this is also coming on the heels of the CBN instruction to commercial banks to publish allocation of forex to end-users, this has in recent times ensure that real sector of the economy and genuine users for education and medicals have been able to access forex at official rate.
In the same vein, industry analysts have described the development as a game changer for majority of local manufacturers in Nigeria. The manufacturers acknowledged that the impact of CBN policy on forex since, its inception has more than double their productive capacity, with attendant benefits in terms of expansion to meet increasingly higher demands for their products and services.
The Analysts said, “Conveniently, since the CBN foreign exchange policy came into existence, production capacity by local manufacturers has increased from 50%- 70%. This has impacted on their propensity to increase exports with higher volumes which is expected to also earn Nigeria commensurate higher foreign exchange earnings.”
Speaking further, the analysts are of the opinion that the policy has helped the local manufacturers to realise the urgent need to expand because of increasing demands for their products. Some of the manufacturers have submitted proposals for expansion and creation of new manufacturing plants, which the CBN has agreed to provide commensurate foreign exchange requirements to finance such ventures that will create employment and improve Nigeria’s capacity to attract more foreign exchange earnings.
The analysts also revealed that some of the local manufacturers are now developing capacity to also attract foreign investors, who are exploring investment opportunities in local firms to enjoy economies of scale and direct access to some of the raw materials required for production without increasing the cost of production.