$28.9b Reserves: CBN Warns Against Reckless Forex Spending

With Nigeria’s foreign reserve standing at $28.9 billion, the Central Bank of Nigeria (CBN) has warned against reckless depletion of the kitty.

Addressing reporters at the end of the bi-monthly Monetary Policy Committee (MPC) meeting in Abuja yesterday, CBN Governor, Godwin Emefiele said the reserves today stands at $28.9 billion.

“The fact that we have began to see some accretion to the reserve does not mean we should be reckless,” he warned.

He said the CBN “will continue with the policy of ensuring that forex is made available to those who are importing raw materials and supporting the agricultural sector but not to those who want to engage in less important sectors of the economy.”

“It is exciting to see this (rise in foreign resreves) happen. We do not run a floating regime, we run a managed float. What that means is that from time to time we will continue to intervene in the market to ensure that the exchange rate does not go beyond our expectations and those interventions would be to moderate the risk as we deem necessary,” he said.

Reacting to accusations that the apex bank is keeping multiple exchange rates, the CBN governor appealed to “those who are out there fomenting this bad stories in order to portray the monetary authorities in bad light to please assist us, if they have questions they should please approach us, we would respond to them as appropriate.”

Emefiele said the allegations of multiple rates is unfortunate and unfair from those with direct access to information in the CBN. “What I had expected is that they would talk to us, I know they know but of course the objectives they’re pursuing is best known to them,” he said.

He explained the “budget rates are forecast rates which has always been there from history; it is a rate used to determine the budget, we seized the opportunity when the issue of pilgrimage came up last year to explain what happened and you must put yourself in the position of a businessman where you have struck a deal but because the conditions have changed you now pull back and begin to change the conditions.

That is an unfair business practice. What happened was that sometime last year the pilgrims commissions (both Christian and Muslim) approached the CBN when the rate was N197/$ and those who were going on pilgrimages started to make payments at N197/$.”

He added that “they made their full payments in advance of the pilgrimages so when they now wanted to embark on their pilgrimages in July and August, somebody says because market has moved they should pay N300+/$. That would have, on the part of the CBN, been seen to be an unfair business practice just like if the rate had gone down. All other rates operate within the interbank segment and operate within the range.”

On the recent call by Vice President Yomi Osinbajo for both monetary and fiscal authorities to meet on the fate of the naira, the CBN governor stated that “we have been operating flexible exchange rate policy since June 2016 and that document is sound. There may be a few fine tuning in terms of the implementation strategies; we would look at it from time to time but there is nothing wrong with that document and there is nothing wrong with what the CBN is doing at this time to stabilise exchange rate but we will see to it that the currency stabilises at a rate that we consider to be in line with any model that anybody wants to use to determine the price and value of our currency. There is no need for anybody to panic.”