For in relation to 7 years, the Central Bank Governor, Godwin Emefiele has struggled to halt the free-fall of the Naira, which continues to struggle with major currencies around the world.
The interventionist approach of Emefiele has failed to spur the Naira which has been experiencing unprecedented slum, from the N165 to a dollar that he inherited in 2014 when he was appointed by former President, Goodluck Jonathan to what it is trading at currently in the parallel market place.
To defend the Naira, Mr Emefiele has adopted fairly a number of intervention policies that many economists considered to be exterior the ambit of the monetary policy mandate of a central bank.
Policies such as the anchor borrowers programme, strategic maize reserve, Agri-business/little and medium enterprise investment programme and targeted credit facility, all targeted at spurring local production to bring down import.
In March, the CBN also introduced the CBN Naira for dollar to encourage Nigerians in the diaspora to send money through the licenced International Money Transfer. The policy is to give N5 for every dollar received through the IMTO.
In the middle of the pandemic, Mr Emefile penned an op-ed on what the country needs to do to mitigate the impact of the lockdown due to the pandemic. In the op-ed, the CBN governor made an statement for to a greater extent intervention to growth local production.
“For a country of 200 million people…we can no longer proceed to disregard repeated warnings on the dangers that prevarication ahead whether we don’t begin to depend largely on what we create locally…,” said Emefiele.
To observers, this line of statement conforms with the direction of the CBN under Emefiele, who seeks to lower importation to bring down the force per unit area on the foreign reserve and by extension the Naira.
Mr Emefiele supported the border closure to protect the CBN anchor borrowers programme, targeting sufficiency in the production of rice. This policy appears to be in sync with President Muhammadu Buhari, who reappointed Mr Emefiele for a moment tenure in 2019.
In the op-ed cited , Governor Emefiele did not disavow the tag of protectionism, rather, he justified the tag as follows.
“Many times, the Bank has been accused of promoting protectionist policies. My reply has ever been that leaders are foremost and foremost accountable to their have citizens.”
At the time of writing this study, the Naira is trading to N570 to a dollar at the dark market place.
Lately, Mr Emefiele has taken a to a greater extent direct approach to salve the Naira, including a new approach on Bureau De Modify operatives and the scrap with Abokifx.
In this piece, DAILY POST takes a review of the central bank monetary policy under Governor Emefiele and its corresponding impact on the Naira and the economic system.
Ban of cryptocurrency
On the 5th of Feb, the Central Bank of Nigeria issued a circular prohibiting commercial banks from dealing with entities trading cryptocurrency. The policy generated uproar.
The CBN had said the opacity in cryptocurrency has go good suited for conducting many illegal activities including money laundering, terrorism financing and purchase of little arms.
Fifty-fifty though the CBN issued the circular to banks, it has not necessarily declared it illegal, through peer to peer platforms, Nigerians proceed to merchandise in cryptocurrency, which allows Nigerians to purchase bitcoins and others direct from those willing to sell. The exercise of Whatsapp is also pop amid traders of these crypto coins.
Paxful, a crypto trading platform has 1.5 million subscribers in Nigeria, out of its total N7 million users globally.
The latest policy by the CBN is the planned introduction of digital currency, a digital shape of fiat currency which will be launched on the 1st of Oct to coincide with the Independence Daytime celebration.
The digital currency by the CBN is different from cryptocurrency, as the latter is to a greater extent or less similar fiat money to be issued by the Central Bank and will be pegged to the Naira. This is totally against the rule of crypto, which is not regulated by whatsoever dominance,
An economist, Wasiu Adekunle, a Research Analyst with the Nigeria Economical Summit Grouping (NESG) told DAILY POST that the e-currency by CBN is not an alternative to cryptocurrency, rather a digital substitute to the Naira, which will only assistance the cashless policy of the regime.
He stated that despite attempts by the Central Bank to unify the market place through the I&E window, the parallel market place is the true reflection of the value of the Naira.
“The issue is not in relation to defending the Naira or not. What we are supposed to do to stabilize the naira, we are not doing it. Whether you enquire an economist what determines the exchange rate, they are Inflation, involvement rate and output (how much you create as a country?)
“Whether you take inflation, whether inflation is 5 percent in the US, and inflation in Nigeria is 17% as it is. The relative purchasing powerfulness parity of naira to a dollar will depreciate by 12%, which is the difference betwixt the 2 inflation rates. That is whether the exchange rate in Nigeria follows that relative purchasing powerfulness parity.
“How does it work? When inflation is high in Nigeria, it is an indication that our production cost is high in Nigeria. People will not want to purchase from us, it is called imported inflation.”
Speaking on the ring by some Nigerians that the CBN should float the Naira, he stated that nearly all the options have been experimented by Nigeria, rather the country has adopted the managed float policy, of having the pegged and float FX policy existing side by side.
“We have experimented with all the options, floating and pegging. We have experimented with peg, which is the fixed exchange rate, we experimented float during SAP (Structural Adjustment Programme), at present we have managed float exchange rate, which is a combination of both.
“Official rate, don’t forget, CBN stopped the fixed-rate, by adopting the NAFEX window, which is the I&E rate. We don’t have an official rate, which is one of the ways Emefiele is trying to unify the rates. There has been force per unit area from the International Monetary Fund that Nigeria should unify the rates, that multiple exchange rates are creating problems.
“What Emefiele is trying to do by devaluing the naira 3 times in the yesteryear twelvemonth, and by adopting NAFEX, is stylishly unifying the rates. The parallel rate is the realistic rate. They are to a greater extent of an underground economic system, determined by demand and render.”
The Presidential candidate of the Immature Peoples Political party in the 2019 election and former deputy governor of the Central Bank of Nigeria, Kingsley Moghalu latterly slammed the FX policy of the CBN.
In a Twitter thread on Monday, Moghalu said the Naira will remain unstable as long as Nigeria depends on rough oil as the only source of FX.
According to Moghalu, the Naira crisis will acquire worse due to the growing debt, inflation and activities of speculators, who will be prying on weak currencies around the world.
Patch the country awaits the official launch of the e-naira, the concern remains that this will autumn into the other series of attempts to preserve the Naira.
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