Bismarck Rewane, managing director of Financial Derivatives Company, says the policies of the Central Bank of Nigeria (CBN) are yielding positive results, particularly in stabilising the naira and improving market efficiency.
Speaking on the Global Business Report show on Arise TV, Rewane said while the naira remains undervalued, it is gradually aligning with its fair value due to the CBN’s interventions.
He commended the regulator for unifying the foreign exchange (FX) market, eliminating multiple exchange rates, and ensuring price discovery.
“There were about five rates or six rates before now. The market was in various segments. There was a price discriminating monopoly where the Central Bank was selling at a particular rate and people were selling back to the CBN at a different rate,” the managing director said.
“Now what the Central Bank set out to do and we applaud them for that is the fact that they now decided to desegment the market to open it up, make it transparent so that there can be price discovery for fair value and efficiency, and had all these policies about zero placement levels and all of that, that has achieved its objective.
“So the speculative instincts and the arbitrage regulatory and market arbitrage opportunities were reduced. Therefore you saw some stability.”
On key economic improvements, the economist said Nigeria’s balance of trade has risen to $18.6 billion, the highest in years, meaning that the country now exports more and imports less.
The economist added that capital inflows have significantly increased.
“Foreign portfolio investors brought in about $10 billion, exports generated $8.25 billion, the CBN itself got inflows of $3.7 billion, and corporates actually brought in $9.7 billion, making a total inflows of $31 billion, which was commendable,” Rewane said.
“So are the policies working? Our humble opinion is that the policies are working.
“Why do we say that? We say that because the difference between the parallel and official rates have dropped to like less than 1 percent. Before it was as much as 10, 15, 20 percent. Now that has been achieved.
“The market and price discovery is efficient. We are no longer saying Aboki FX and blaming all sorts of shadow people. So we have that.
“Three, the balance of trade is now $18.6 billion. It’s the highest level in a long time. The balance of trade is the difference between your exports and your imports. In other words, Nigerians are importing less and exporting more. Why? Because the exchange rate has moved against them.”
Rewane noted that the CBN has been systematic in its interventions, ensuring that funds are directed towards key obligations, including settling foreign portfolio inflows, repaying the blocked funds for airlines, and stabilising the currency.
The managing director, however, noted that the CBN can achieve more and is committed to making further improvements.
