The Nation Newspaper

Tag: naira stable

  • Naira stable despite election fears, says ABCON

    • CBN’s, BDCs’ reforms hailed

    The naira has in over 18 months remained stable at both the official and parallel markets despite several odds facing it ahead of the 2019 general elections, President, Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe has said.

    Speaking yesterday to financial journalists in Lagos, the ABCON boss commended the Central Bank of Nigeria (CBN) financial sector reforms, and the contributions of the Bureau de Change (BDC) operators to the current exchange rate stability, as against the common practice of currency devaluations and depreciations across the world at election times.

    The naira exchanges at N306/$1 in the official market and N358/$ in the parallel market despite the election fears.

    Gwadabe said that the absence of foreign exchange spikes and volatility before and during the 2019 elections year is a major achievement by the CBN and Federal Government. He said: “The dexterity of the government policies in ensuring that naria remained stable in an election year is commendable. Election years, as witnessed during the 2015 general elections, are marred by exchange rate volatility and spikes in the market”.

    He disclosed that financial pundits had had in early 2016, speculated that the naira will depreciate to as low as N1000/$. The election period of 2015, he added, witnessed over $100 billion capital flight outside the country. The activities of currency hoarders, speculators and rent seekers reached its peak in 2015.

    He disclosed that ironically, the trend in the foreign exchange market during this year’s election showed hope for the economy, sustained exchange rate stability, adequate dollar liquidity, increasing foreign capital inflows and most importantly, a unified and convergent exchange rate of the BDCs and the parallel market. These feats, he said, are commendable by all standards.

    On deepening capacity/skills of industry operators, Gwadabe    appealed  to the CBN to issue Letter of Consent to ABCON proposed training institute.  This, he added, is going to boost the current ABCON Management commitment to capacity building for its members to stimulate competency in the sector and make room for better foreign exchange management.

    Continuing, Gwadabe also listed factors that led to the current successes in the foreign exchange market. He said: “First, I want to congratulate the leadership of the CBN for a well coordinated, proactive exchange rate management strategies which include creation of several foreign exchange windows to deepen liquidity and price discovery, restriction of foreign exchange on 42 items that can be produced locally, self sufficiency in rice production and continuous partnerships between the apex bank and BDCs, all led to the current exchange rate stability enjoyed in the country”.

    According to Gwadabe, the contribution of the security agents in the effective surveillance of Nigeria’s boarders/ airports to checkmate illegal foreign currency evacuation have in no small measure strengthened  exchange rate and promoted economic growth.

    He also praised the BDC operators under the ABCON leadership for staying in the business despite  lower margins and risk of operations they face on daily basis.

    The ABCON boss said the BDCs have remained resolute in ensuring sustainable and stable exchange rate, price discovery and uniformity in the market pricing for the dollar against the naira.

    He said the current one per cent transaction margin that operators take is not sufficient for BDCs’ sustained operation, and totally falls below global standard of 10 per cent.

    He said the BDCs under the ABCON leadership have demonstrated patriotism in the business by staying and sustaining it despite several challenges facing  the sector.

     

     

  • I&E Forex window, CBN’s role to keep naira stable

    With about $60 billion turnover in 21 months, the Investors’ and Exporters’ (I&E) Forex Window launched by the Central Bank of Nigeria (CBN) in April, last year, has surpassed stakeholders’ expectation. The window is not only a boost to forex liquidity, but has helped to keep the Naira stable at the official and parallel markets, writes COLLINS NWEZE.

    Not many investors – local and international – gave it any chance to succeed when it was introduced. But, 21 months after, the Investors’ and Exporters’ (I&E) Forex window, launched by the Central Bank of Nigeria (CBN), has attracted nearly $60 billion to the economy and is one of the key instruments expected to help stabilise the local currency against other currencies in the New Year.

    The weekly dollar interventions by the bank is also expected to help in stabilising the local currency. The CBN also injected over $10.97 billion into the foreign exchange market between January and October, last year to defend the nation’s currency, the naira, against other major currencies, including the United States dollar.

    The $10.97 billion was based on weekly compilation of amounts released by the apex bank to boost liquidity in the foreign exchange market. The CBN’s interventions have helped to keep the local currency stable and is expected to continue in the new year.

    A report by FSDH Research said that prior to the I&E Forex window introduction in April, last year, the market and exchange rates were in turmoil. However, in a dramatic turn of events, the acute shortage of forex, which businesses and individuals grappled with, witnessed an unprecedented improvement, with banks and Bureaux de Change (BDCs) now desperately looking for forex buyers.

    The FSDH Research Monthly Economic and Financial Market Outlook said  the  positive  domestic  and  external  environment  will  further lead  to  external  reserves accretion  in  the  short-term, a development the report predicted will further stabilise  the foreign exchange rate.

     

    Defending the Naira

    The CBN injected over $10.97 billion into the foreign exchange market between January and October, last year, to defend the nation’s currency, the naira, against other major currencies, including the United States dollar.

    The $10.97 billion was based on weekly compilation of amount released by the apex bank to boost liquidity in the foreign exchange market.

    The CBN usually intervenes in the foreign exchange market by injecting liquidity about three times a week.

    The intervention is provided to authorised dealers in the wholesale segment of the market as well as other sectors of the economy such as agriculture, manufacturing and the Small and Medium Enterprise segment.

    Customers that required foreign exchange for invisible things such as tuition fees, medical bills and Basic Travel Allowance are also allocated funds from the intervention.

    An analysis of the weekly intervention shows that the apex bank injected about $1.2 billion in January while February, March and April had $1.49 billion, $1.38 billion and $1.03 billion, respectively.

    The CBN’s intervention in the month of May was estimated at about $1.06 billion; June, $1.29 billion, while July had $970 million among others.

     

    Before I&E Forex window

    Before the introduction of the forex window, the local equities market and the foreign exchange (forex) market were in shambles.  The All Share Index (ALSI) was continuously shrinking and the naira weakened against other currencies, especially the dollar.

    The I&E window has become the attraction, making many of the business concerns to take another look at their exit from the country.

    The introduction of the window was followed by continuous interventions by the CBN which enabled banks and BDC operators to meet forex demand at the retail end of the market. Thus, the window has become a life-saving pill for the domestic economy as it has attracted about $60 billion into the market, enhanced transparency and made forex available to the end-users.

    The operations of companies, especially manufacturing, has been on the upward swing with an improvement in inflation figures as well as equities market performance.

    According to the CBN Director in charge of Financial Markets, Alvan Ikoku, the “Investors’ & Exporters’ FX Window” is boosting liquidity in the forex market and ensuring timely execution and settlement for eligible transactions by all parties.

    Before the stability in the forex market and naira, the economy witnessed a depressed Gross Domestic Product (GDP) growth, which culminated in a recession in 2016.

    “There was also rising inflation, which peaked at almost 19 per cent in January 2017 and a persistently rising unemployment rate to 14.23 per cent in 2016 fourth quarter from 6.41 per cent as at 2014 fourth quarter. There was also a significant depreciation of the exchange rate, reaching N525 to $1 in February 2017 and witnessed a fast depletion of the reserves which was drained down from about $23.6 billion in October 2016 from as high as $40 billion in January 2014.

    “The I&E Forex window, seen as a ‘willing buyer, willing-seller window’, allows foreign investors to bring in dollars into the economy at any price of their choice, provided they could find buyers at such rate. The figure at the window has also impacted positively on the Purchasing Managers’ Index (PMI).”

    A  Lagos-based economist and Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, described the introduction of the I&E forex window as the best policy implemented by the CBN.

    Speaking on the issue, CBN’s Director, Corporate Communications, Isaac Okorafor, reiterated the bank’s commitment to ensure adequate forex supply to genuine customers to achieve the goal of forex rates convergence.

    Managing Director, Afrinvest West Africa Plc, Ike Chioke, said the window has won the confidence of foreign investors. He said the window attracted foreign investors’ appetite for Nigerian assets leading to impressive appreciation in the equities market and stabilising the naira.

    Before the introduction of the window, foreign investors’ appetite for local assets waned significantly on the back of currency crisis which in turn fundamentally weakened macroeconomic performance, dragged corporate earnings and also impacted on equities market viability.

    According to the CBN spokesman, forex supply to the window shall be through portfolio investors, exporters, authorised dealers and other parties with foreign currency to exchange to naira. The apex bank is a market participant at the window to promote liquidity and professional market conduct.

    He said that the apex bank assured that the exchange rates of the transactions would be as agreed between authorised dealers and their counterparties.

    Besides, he said the regulator reserved the right to intervene as a buyer or seller, as it deems fit, in the window, even as information on transactions between authorised dealers is reported to the CBN on a daily basis. Manufacturers and other foreign exchange (forex) end-users also seem to be having a great time over the coming of the window.

    Barely a month after trading at the window commenced operation, international credit rating agency, Fitch Ratings, released a report, stating that the establishment of the I&E Forex window had led to an improvement in banks’ forex liquidity situation.

    The naira has been stable at the official and parallel markets, with the foreign exchange (forex) reserves standing at $47.6 billion, a report by Exotic Capital, an investment and research firm, has said.

    The report said although the level of reserves was still below the record high of $64 billion realised in August 2008, it has nearly doubled the $24 billion recorded in October 2016, increasing by more than $22 billion in 17 months.

    “We have written extensively on Nigeria’s multiple exchange rate system and will abstain from further discussion at present, suffice to say that a fairly valued naira at 360 to the dollar combined with high domestic rates has led to a tremendous increase in the level of gross foreign reserves held at the CBN,” the report said.

    A similar report by FBN Capital, entitled: “Towards the $50 billion threshold, and counting”, said the rapid accumulation of $15.96 billion over 12 months was due to two sizeable Eurobond launches, a small diaspora bond issue, the recovery in oil export revenues (through the Nigeria National Petroleum Corporation’s share of production and, more recently, the steady bid by the CBN at the I&E Forex window.

    The FBN Capital report said: “We should stress that the data are gross and mask the swap transactions the CBN has entered into with local banks. The steady bid by the CBN has been seen variously as a response to the softening of demand for forex by importers and other economic actors, and as a move to contain naira appreciation.

     

    Currency control measures

    The CBN has imposed some currency control measures to save the naira. In June 2016, it curbed access to the interbank currency market for importers bringing in a variety of goods. In an effort to conserve its dollar reserves, the bank said importers could no longer get hard currency to buy 41 items, ranging from toothpicks and rice to steel products and private jets.

    Other measures it took include the first Naira-Settled Over-the-Counter (OTC) Forex Futures Market (FFM) launched with FMDQ OTC Securities Exchange and the planned resumption of dollar sales to the BDCs.

    The FMDQ OTC Securities Exchange (FMDQ) is an organisation with the strategic intent of bringing about revolutionary changes and fostering the development of the financial markets.

    The Naira-Settled OTC Forex Futures are non-deliverable forwards, or a contract where parties agree to an exchange rate for a pre-determined date in the future, without the obligation to deliver the underlying dollar on the maturity/settlement date. On the maturity date, it will be assumed that both parties would have transacted at the spot forex market rate. The party that would have suffered a loss with the spot forex rate will be paid a settlement amount in naira to ensure that both parties enjoy the rate that had been guaranteed to each other through the OTC Forex Futures.

  • Naira stable despite campaign spendings

    THE naira has remained stable at both the official and parallel markets despite huge campaign spendings by political parties, The Nation learnt yesterday.

    The stability of the local currency was linked to measures instituted by the Central Bank of Nigeria (CBN) and the Association of Bureaux De Change (BDC) Operators of Nigeria (ABCON) to ensure that foreign exchange demand at the retail end of the market was met.

    ABCON President Aminu Gwadabe told financial reporters in Lagos at the weekend that despite huge campaign spendings, the CBN spot rate/official exchange rate closed last week at N306.75/$1 from N306.70/$1 in the prior week.

    The exchange rate at the Investors & Exporters Forex window closed at N364.70/$1. At the parallel market and Bureaux De Change (BDCs) segment, the naira traded at N363/$1 throughout the week.

    The measures initiated by the CBN, including the sustenance of dollar supply to over 4,000 Bureau De Change (BDC) operators through the International Money Transfer Operations (IMTOs) forex window, have helped the  local currency.

    The apex bank had earlier warned that the economy faced inflation and financial stability risks over the short-to medium-term if huge election spending is not checked.

    The regulator believed that if excess liquidity was allowed to build up, the demand for foreign exchange could shoot up in the second half of this year and throw the naira exchange rate out of equilibrium.

    Gwadabe said: “The naira remains stable despite political campaign spendings by political parties across the nation. The strategic partnership, actions and pre-actions of the Central Bank of Nigeria and the ABCON have stopped distortions to the exchange rate due to ongoing politicking and campaign spendings in the country.”

    Continuing, he said the determination of the apex bank to maintain the IMTOs forex window for the over 4,000 BDCs on weekly basis has brought steady liquidity in the market and discouraged unethical market behaviours like hoarding, speculation and frivolous demand.

    Gwadabe said that on its part, ABCON has ensured that its members continue to make dollar accessible to critical end-users like travelers demanding personal and business travel allowances, school fees and medical bills payment abroad among others.

    He said the ongoing ABCON automation and configuration of soft token for forex return rendition by over 4,000 BDCs nationwide will enhance transparency and financial integrity of the operators.

    “This feat will no doubt strengthen the effectiveness of the technical compliance of the anti-money laundering and counter terrorism financing laws and help Nigeria’s assessment into the Financial Action Task Force coming up next year.” he stated.

    The ABCON boss was impressed that increased surveillance by the security agencies on illicit financial flow and controls at the nation’s borders have enhanced the stability in the market.

    He said that the secondary market currently enjoys huge confidence making it difficult for forex speculators and illegal forex dealers to manipulate the market.

    Gwadabe identified IMTOs operation as part of the efforts by the apex bank to liberalise the forex market, boost liquidity and make dollar more readily available to low end users.

    He lauded the apex bank for continuously providing an enabling environment for IMTOs and BDCs which has in no small measure, deepened availability of forex at the retail end of the market.

    He explained that although declining global oil prices should fundamentally lead to massive depreciation of the naira, but the commitment of the CBN to the defence of the naira keeps providing stability for exchange rates at different segments of the forex market.

    Gwadabe said the coming of I&E Forex Window, was also part of CBN’s efforts to further develop the Nigerian forex market and improve market structure.

    On regulatory compliance, Gwadabe said the licensed BDCs are committed to naira’s stability at both official and parallel markets and have consistently partnered with the CBN to achieve this objective.

    Gwadabe said: “The CBN-licensed BDCs have always played collaborative and positive roles for the regulator in achieving exchange rate stability. Besides, CBN’s admission of licensed BDCs into the International Money Transfer Operators- IMTOs-Window has continued to keep the naira stable.

    “ABCON has continuously assured the CBN and taken appropriate measures to ensure that purchased funds are disbursed to end users and for eligible transactions only.

    “We also render weekly returns on purchases from the banks to Trade and Exchange Department of the apex bank.  We also ensure strict compliance to the provisions of the anti-money laundering laws observance of appropriate Know-Your-Customer principles in the handling of forex transactions.” The ABCON chief reiterated the need for the forex users to deal with CBN-licensed BDCs only, and urged the public to report errant operators for necessary sanction.

  • $48b foreign reserves, forex interventions keep naira stable

    The naira will remain stable at both the official and parallel markets, with the rise in foreign reserves to $48 billion and the consistent dollar interventions by the Central Bank of Nigeria (CBN), analysts have said.

    Analysts at Afrinvest, an investment and research firm, said with oil prices above $70/barrel and the look-good state of the foreign reserves, the outlook on exchange rate remains positive.

     

    They said the apex bank will continue to support the naira through consistent dollar injections.

    At the official market, the naira traded flattish opening at N305.90/$1 on Monday, a five kobo appreciation from the previous Friday and closed at N305.85/$1 Thursday, appreciating two basis points or five kobo week-on-week. Similarly, the naira traded flat at the parallel market opening and closing the week at N362/$1.

    CBN Director, Banking Supervision, Abullahi Ahmad, confirmed the reserves status during the last  Bankers’ Committee meeting in Lagos.

    In an emailed report to investors, Afrinvest explained that in its unflinching commitment towards stabilising the local currency against the greenback, the CBN had last week injected $210 million into the system through the Wholesale Secondary Market Intervention Sales (SMIS) window. Hence, rates across all segments of the market remained relatively stable in the week.

    “At the official market, the naira traded flattish opening at N305.90/$1 on Monday, a five kobo appreciation from the previous Friday and closed at N305.85/$1 Thursday, appreciating two basis points or five kobo week-on-week. Similarly, the naira traded flat at the parallel market opening and closing the week at N362/US$1,” it said.

    At the Investors and Exporters’ Window (I&E) FX window however, the naira experienced slight fluctuations during the week appreciating on two of four trading days to buck the flattish trend in other markets.

    Last Monday, the naira depreciated

  • $48b foreign reserves, forex interventions keep naira stable

    The naira will remain stable at both the official and parallel markets with the rise in foreign reserves to $48 billion, and the consistent dollar interventions by the Central Bank of Nigeria (CBN), analysts have said.

    Analysts at Afrinvest, an investment and research firm, said with oil prices above $70/barrel and the look-good state of the foreign reserves, the outlook on exchange rate remains positive. They said the apex bank will continue to support the naira through consistent dollar injections.

    At the official market, the naira traded flattish opening at N305.90/$1 on Monday, a five kobo appreciation from the previous Friday and closed at N305.85/$1 Thursday, appreciating two basis points or five kobo week-on-week. Similarly, the naira traded flat at the parallel market opening and closing the week at N362/$1.

    CBN Director, Banking Supervision, Abullahi Ahmad, confirmed the reserves status during the last  Bankers’ Committee meeting in Lagos.

    In an emailed report to investors, Afrinvest explained that in its unflinching commitment towards stabilising the local currency against the greenback, the CBN had last week injected $210 million into the system through the Wholesale Secondary Market Intervention Sales (SMIS) window. Hence, rates across all segments of the market remained relatively stable in the week.

    “At the official market, the naira traded flattish opening at N305.90/$1 on Monday, a five kobo appreciation from the previous Friday and closed at N305.85/$1 Thursday, appreciating two basis points or five kobo week-on-week. Similarly, the naira traded flat at the parallel market opening and closing the week at N362/US$1,” it said.

    At the Investors and Exporters’ Window (I&E) FX window however, the naira experienced slight fluctuations during the week appreciating on two of four trading days to buck the flattish trend in other markets.

    Last Monday, the naira depreciated 39 kobo to N360.55/$1 from N361.16/$1 recorded the previous Friday before closing the week at N360.45/US$1, 10 basis points appreciation week-on-week. On the flipside, activity level declined, as total volume of transactions fell 37.6 per cent to $0.7 billion from $1.2 billion recorded the previous Friday.

    Furthermore, total value of open contracts at the Naira settled Over the Counter (OTC) futures contract market stood at $4.49 billion, 0.7 per cent decline from $4.52 billion on previous Friday’s close.

    Another report Exotic Capital said although the level of reserves was still below the record high of $64 billion realised in August 2008, it is nearly double the $24 billion recorded in October 2016, increasing by more than $22 billion in 16 months.

    The reserves hit $46.7 billion on March 29, from just over $23 billion in October 2016, as the economy continues to attract huge investment inflows from foreign investors.

    The economy benefited from increased forex supply with over $50 billion inflow to the Investors’ & Exporters’ (I&E) Forex Window since inception in April 2017.

    ”We have written extensively on Nigeria’s multiple exchange rate system and will abstain from further discussion at present, suffice to say that a fairly valued naira at 360 to the dollar combined with high domestic rates has led to a tremendous increase in the level of gross foreign reserves held at the CBN,” the report said, adding: “With reserves at their current levels, it is easy to imagine the MPC being in a position where it could afford to cut as it is less dependent on attracting dollar inflows than it has been to both build reserves and stabilise the naira.”

    A similar report by FBN Capital, titled: “Towards the $50 billion threshold, and counting”, said the rapid accumulation of $15.96 billion over 12 months was due to two sizeable Eurobond launches, a small diaspora bond issue, the recovery in oil export revenues (through the Nigeria National Petroleum Corporation’s share of production and, more recently, the steady bid by the CBN at the I&E Forex window.

    “We should stress that the data are gross and mask the swap transactions the CBN has entered into with local banks. The steady bid by the CBN has been seen variously as a response to the softening of demand for forex by importers and other economic actors, and as a move to contain naira appreciation,” the FBN Capital said, adding: “The CBN will be pleased with the healthy signals from I&E Forex window where the weekly average has now settled above $1 billion. Reserves at end-March covered 17 months’ merchandise imports, and 10.9 months when we add services. These calculations are based on the balance of payments for 2017. The ratios are a little less impressive, but still robust, if we use the measure of current account payments (including income debits) favoured by the ratings agencies.”

     

     

     

    Before the stability in the forex market and naira, the economy witnessed a depressed Gross Domestic Product (GDP) growth, which culminated in a recession in 2016. There was also rising inflation, which peaked at almost 19 per cent in January 2017 and a persistently rising unemployment rate to 14.23 per cent in 2016 fourth quarter from 6.41 per cent as at 2014 fourth quarter. There was also a significant depreciation of the exchange rate, reaching N525 to $1 in February 2017 and witnessed a fast depletion of the reserves which bottomed out at about $23.6 billion in October 2016 from as high as $40 billion in January 2014.

     

  • Naira stable at official, parallel markets

    The gap between banks’ bids to buy and sell the naira to investors is widening due to a tight supply of dollars in the market, traders told Reuters yesterday.

    But the local currency stable at the close of business yeatsrday.

    The rate gap, traders said, suggest the currency is coming under international pressure even as government finances improve. Some lenders are seeking to sell the naira at N365 per dollar to investors, while others offered to buy at 359. Banks were trading between themselves in the middle at N362 per dollar, traders said.

    But when contacted, President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, said the naira remains stable and not under any threat.

    The naira bid-offer spread has been much tighter in the past, usually ranging between N359 and N360.

    The naira had been relatively stable at 360 to the dollar for months after the central bank in April 2017 liberalised trade in the currency for investors as it emerged from a currency crisis and recession brought on by low oil prices that also slashed government revenues.

    The central bank then introduced a multiple exchange rate regime to closely manage dollar demand as a way to alleviate chronic dollar shortages. Part of the latest shortage of dollars is due to offshore funds dumping Nigerian bonds following a fall in yields and multinationals repatriating their dividends.

    Traders also said the central bank has reduced its issuance of open market bills and lowered the interest rates it offered, signaling a more dovish stance on interest rates that nevertheless makes the currency less attractive for foreign investors.

    This shift at the central bank comes after the government paid off some of its treasury bills rather than rolling them over as it has done in the past, in a move to lower its borrowing costs. This has made investors pull funds away from Nigerian fixed income securities, which coupled with firms repatriating dividends abroad puts pressure on the currency market.

    In one example of the currency pressure from dividends, the Nigerian unit of South Africa’s MTN declared a dividend of 50 billion naira in 2017 and paid a further dividend in the first quarter, which it said it would repatriate to offshore investors – meaning it would sell that amount of naira.

    On the official market the naira is quoted at around 305 per dollar, where it has been for over a year, supported by regular central bank interventions. One lender traded the currency at 314.50 naira on Thursday.

    Yields on government bonds stand at about 12 percent, well down from 18 percent a year ago, after the state paid off some of its treasuries amid falling inflation.

     

  • $46.7b foreign reserves keep naira stable

    The naira remains stable at the official and parallel markets, with the foreign exchange (forex) reserves standing at $46.7billion, a report by Exotic Capital, an investment and research firm, has said.

    The naira exchanges at 362 to the dollar in the parallel market and 305.6 in the official market. It has remained at those rates since April, last year, after the Central Bank of Nigeria (CBN) resumed forex interventions in the market.

    The report said although the level of reserves was still below the record high of $64 billion realised in August 2008, it is nearly double the $24 billion recorded in October 2016, increasing by more than $22 billion in 15 months.

    The reserves hit $46.7 billion on March 29, from just over $23 billion in October 2016, as the economy continues to attract huge investment inflows from foreign investors.

    The economy benefited from increased forex supply with over $20 billion inflow to the Investors’ & Exporters’ (I&E) Forex Window since inception in April 2017.

    The report said the macro fundamentals suggested the Central Bank of Nigeria’s (CBN’s) appropriate reaction function would have been to hold rates unchanged as it did in last week’s Monetary Policy Committee MPC meeting.

    “We have written extensively on Nigeria’s multiple exchange rate system and will abstain from further discussion at present, suffice to say that a fairly valued naira at 360 to the dollar combined with high domestic rates has led to a tremendous increase in the level of gross foreign reserves held at the CBN,” the report said, adding:

    ”With reserves at their current levels, it is easy to imagine the MPC being in a position where it could afford to cut as it is less dependent on attracting dollar inflows than it has been to both build reserves and stabilise the naira.”

    A similar report by FBN Capital, titled: “Towards the $50 billion threshold, and counting”, said the rapid accumulation of $15.96 billion over 12 months was due to two sizeable Eurobond launches, a small diaspora bond issue, the recovery in oil export revenues (through the Nigeria National Petroleum Corporation’s share of production and, more recently, the steady bid by the CBN at the I&E Forex window.

    “We should stress that the data are gross and mask the swap transactions the CBN has entered into with local banks. The steady bid by the CBN has been seen variously as a response to the softening of demand for forex by importers and other economic actors, and as a move to contain naira appreciation,” the FBN Capital said, adding:

    “The CBN will be pleased with the healthy signals from I&E Forex window where the weekly average has now settled above $1 billion. Reserves at end-March covered 17 months’ merchandise imports, and 10.9 months when we add services. These calculations are based on the balance of payments for 2017. The ratios are a little less impressive, but still robust, if we use the measure of current account payments (including income debits) favoured by the ratings agencies.”

    Before the stability in the forex market and naira, the economy witnessed a depressed Gross Domestic Product (GDP) growth, which culminated in a recession in 2016. There was also rising inflation, which peaked at almost 19 per cent in January 2017 and a persistently rising unemployment rate to 14.23 per cent in 2016 fourth quarter from 6.41 per cent as at 2014 fourth quarter. There was also a significant depreciation of the exchange rate, reaching N525 to $1 in February 2017 and witnessed a fast depletion of the reserves which bottomed out at about $23.6 billion in October 2016 from as high as $40 billion in January 2014.