Nigeria’s Forex Problem, Beyond CBN’s Ability — Afrinvest – The Whistler Nigeria

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Managing Director and Chief Commercial Officer of Optimus by Afrinvest, Ayodeji Ebo, doubted the ability of the Central Bank of Nigeria to solve the country’s foreign exchange problems.

Ebo said the CBN lacks the capacity to resolve currency pressure on the economy, saying the problem is “structural”.

He said: “We know that the main source of foreign exchange for the CBN or for the government has gone down considerably, which is oil. We are all aware of the theft of oil and the reduction of investment in this sector.

“And also looking at the external reserves over the last seven months, what we’ve seen that has led to the appreciation of the external reserves is the issuance of the Eurobond.”

Nigeria raised $4 billion in Eurobonds in September last year and another $1.25 billion in March.

Finance, Budget and National Planning Minister Zainab Ahmed said the country was considering raising a $950 bond.

He said: “Beyond that, external reserves would have been significantly depleted. This is why the CBN wants to ration external reserves to keep them at a comfortable level.

“So as a result, it’s really very evident that Nigeria is in a difficult foreign exchange situation and that goes beyond what the CBN can solve. It’s more of a structural challenge.

He said the currency crisis needs special attention, adding “we need to reduce oil theft so we can see more inflow into our reserves.”

CBN Governor Godwin Emefiele said at the 2022 World Bank and IMF Spring Meeting in Washington that his policies would reduce pressure on forex.

Emefiele said, “With the Dangote refinery coming in with the 650,000 barrel refinery hopefully towards the end of the year, this will also hopefully reduce the demand for foreign exchange which will normally go to the import of petroleum products.

“I have often said that between importing refined products and importing rice, sugar or wheat, it consumes almost about 40% of the foreign exchange needed to finance imports in Nigeria.

“If we find for example a situation where by the end of this year (2022) we will no longer need foreign exchange to import petroleum products, I think the demand will go down. As the demand goes down, this what you will find is that whatever supply is able to meet demand, we can see a stable exchange rate.

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