Nigerian Central Bank Implements Measures to Counter Naira Decline and Speculative Activity
Amidst the recent depreciation of the naira in the parallel market, the Central Bank of Nigeria (CBN) has initiated foreign exchange intervention measures aimed at curbing currency speculation. Acting CBN Governor Folashodun Shonubi revealed the intervention measures, highlighting that the naira’s volatility is not solely driven by economic factors but also speculative demand.
Shonubi stressed the need for a stable market and expressed confidence that the measures would yield positive outcomes shortly. The CBN recently issued a circular setting limits on the exchange rate for naira payouts of Diaspora remittances, signaling efforts to reduce pressure on the naira in the parallel market.
However, concerns about the country’s external reserves have arisen, with recent financial statements showing a discrepancy in the available foreign-exchange reserves. This situation has implications for the naira’s stability and the country’s ability to manage forex demand amidst dwindling oil earnings and production.
Opinion:
The CBN’s swift action to address the naira’s decline and curb speculative activity is commendable. The implementation of intervention measures and limits on exchange rates for Diaspora remittances demonstrates the central bank’s commitment to stabilizing the forex market and protecting the naira. However, the recent revelation of a discrepancy in the available foreign-exchange reserves raises concerns about the country’s ability to effectively manage its forex liquidity.
As the naira continues to face downward pressure due to factors such as declining oil earnings and production, it is crucial for the CBN to transparently manage its reserves and explore strategies to attract foreign investment and bolster forex inflows. A comprehensive approach that combines monetary policy adjustments, structural reforms, and investor confidence-building measures will be essential to navigate Nigeria’s forex challenges and ensure the stability of its currency.