…As IMF calls for urgent revamp of economy
By Ngozi Amuche
The Central Bank of Nigeria on Friday auctioned the sum of US$418 million at the retail-SMIS at a marginal rate of N310 per dollar.
This was in line with its avowed determination to ensure ample supply of foreign exchange liquidity in the market.
Airlines, agriculture, petroleum and raw materials/machineries sub-sectors benefitted from the auction.
This was in addition to the sum of US$350 million sold as wholesale auction, BTA/PTA, and school fees during the week.
However, in the weeks ahead, the CBN said it will sustain its intervention through the sale of foreign exchange to all segments of the markets, which includes the PTA/BTA, Wholesale SMIS, Retail SMIS and the BDC.
“The Bank will sell short-tenured forwards of 7-30-day maturity to meet demand of manufacturers and all other foreign exchange users,” CBN’s acting Director of Communications, Isaac Okoroafor said.
These significant injections of foreign exchange into the market, according to the apex bank, “should reassure all foreign exchange users of our determination to continue to meet all legitimate FX demand in the market while striving to achieve exchange rate stability.”
However, The International Monetary Fund warned that Nigeria’s economy needs urgent reform for global competitiveness, thereby pointing out the dangers of a volatile foreign exchange market.
In a report published on Wednesday that highlighted the risks to growth and the dangers of a volatile market, IMF outlines a raft of failings in Nigeria’s handling of Africa’s largest economy that could affect talks over at least $1.4 billion in international loans.
It strikes a more critical tone than the Fund’s board adopted in a statement last week, though that also said Nigeria should lift its remaining foreign exchange restrictions and scrap its system of multiple exchange rates.
Nigeria fell into recession in 2016, its first in 25 years, largely due to the impact of low oil prices and militant attacks on energy facilities in the Niger Delta oil hub. Crude sales account for more than 90 per cent of foreign exchange earnings and two-thirds of government revenue.
The country, whose economy contracted 1.5 per cent last year, has also been plagued by a conflict with Boko Haram insurgents since 2009, creating a humanitarian crisis in the northeast, which authorities are struggling to handle.
The Nigerian authorities had said further measures to rescue the economy were under way, which included the implementation of a more flexible foreign exchange market and “maintaining tight monetary policy to underpin price stability”, according to an IMF report.
The World Bank has also been in talks with Nigeria for more than a year over an application for a loan of at least $1 billion and the African Development Bank has $400 million on offer. But talks have stalled over economic reforms.