Economist Bismarck Rewane, CEO of Financial Derivative Company, has praised the Central Bank of Nigeria’s (CBN) recent foreign exchange market interventions, asserting that the bank’s policies are successfully stabilizing the naira. Rewane highlighted that CBN’s primary responsibility is to safeguard the naira’s value by maintaining external reserves, which it is fulfilling with the current measures. He pointed out that these interventions have significantly reduced speculative activities, boosting confidence in the market and promoting transparency.
Rewane explained that, based on purchasing power parity analysis, the naira was undervalued by 26.35% and that CBN’s actions to protect the currency were addressing a misalignment, not supporting an overvalued currency. Additionally, the unification of multiple exchange rates has helped de-segment the market, leading to better price discovery and reduced price discrimination. As a result, the spread between parallel and official exchange rates has narrowed substantially, further stabilizing the currency.
The economist also cited key economic indicators such as Nigeria’s record balance of trade of $18.6 billion and a significant decrease in money supply growth from 85% to 17%. He credited the naira’s depreciation for spurring export growth and making import substitution more viable, while also noting local developments like the Dangote refinery and Nigeria’s increasing role in West and Central Africa’s oil and cement markets. Rewane emphasized that the policies were working, though he acknowledged there was still room for further improvement.
Rewane concluded by emphasizing the CBN’s steadfast approach on interest rates, including the 400-basis-point hike last year, which had a positive impact on the naira’s value. He also addressed misinformation about CBN interventions, differentiating between ignorance that can be corrected through education and deliberate misinformation, which he described as a more challenging issue to tackle.
SOURCE: THISDAY