Nigeria’s investment of foreign reserve in the Chinese currency, Renminbi, has paid off handsomely, the Central Bank of Nigeria (CBN) said yesterday.
The apex bank also said that the economy is strong.
Mallam Sanusi Lamido Sanusi, the bank’s helmsman, spoke at the Regional Course on Optimising Reserves and Foreign Exchange Management for Income Generation.
It was organised by the West African Institute for Financial and Economic Management (WAIFEM) in Abuja.
He said: “The CBN, two years ago, took the strategic decision to diversify the reserve base by investing in Renminbi and it has paid off because in the last two years, Renminbi has been appreciating.”
Sanusi was represented by CBN Deputy Governor (Operations) Mr. Tunde Lemo.
Lemo said: “Before now, people thought only currencies of the OECD economies were good enough, that is the euros, the dollars, the Japanese Yen and so on and so forth. But today, there are emerging economies like in China, the Renminbi.”
The OECD countries are developed economies made up of 34 countries founded to stimulate growth and world trade. They are mainly European countries.
The CBN Deputy Governor added that African countries were not investing their reserves in the continent because they have currencies that are not internationally convertible.
He said: “It may take time before we begin to see African countries investing in other African currencies. But, at least economies like China, Australia, Canada, South Korea may begin to see an upsurge in investments because of the trajectory of their currencies.”
Lemo said: “The issue about risk is changing because of the dynamics of the global economy and, of course, you know pretty well that there are current issues around the currencies all over the world and the debate is ongoing whether or not the dollar will continue to be the de facto currency.”
As a result of this development, many countries, he said, “are making a basket of currencies where they keep their reserves so that they can mix their risk and then begin to diversify”.
On the health of Nigeria’s economy, the CBN governor said the reserve of $46 billion ranks second or third highest in Africa after Algeria “and that is really very remarkable.”
The CBN, however, cautioned that “there might be occasional fluctuations in our foreign reserves”.
Lemo said: “Our reserve level is very strong at approximately $46billion and that’s approximately 11 months of imports. The fundamentals of the Nigerian economy are very strong, occasionally there might be increase or decrease, it has been hovering between $45 and $47billion and that’s very strong.”
WAIFEM Director General, Prof Akpan Ekpo cautioned that unless Nigeria begins to actively produce for export to other countries, the current instability witnessed by Naira would continue.
Ekpo said the trend of exporting raw crude oil to earn foreign exchange will not strengthen the value of the naira.
