CBN rules out naira fall as external reserves hit $34bn

The nation’s external reserves have hit $34bn from $33.6bn attained on October 25, the Central Bank of Nigeria has stated.

The reserves have been appreciating very fast after hitting $32bn on September 18.

The Deputy Governor, Financial System Stability, CBN, Dr. Joseph Nnanna, who disclosed the latest figure in Lagos on Saturday, said the exchange rate stability achieved so far by the apex bank had come to stay.

He expressed confidence that the usual end-of-the-year rush would not push up the naira-dollar exchange rate contrary to some people’s expectations.

The CBN deputy governor said this while fielding questions from journalists at a forum organised by the Chartered Institute of Bankers of Nigeria.

Nnanna was among the chief executive officers of companies who were conferred with the CIBN Fellowship Awards.

Asked if the exchange rate would go up as the end of the year was approaching, Nnanna said, “No, the rate will not go up, take it from me. We have achieved stability and the stability is here to stay.

“The sustainability is already evident, the reserves are growing. As I speak, the reserves are $34bn. When we had volatility, the reserves were as low as $20bn. But let me say one thing: Nigeria can make do with a reserve level of $20bn but it is the press who gives the impression that if the reserves fall below $30bn, then there is a problem.

“No, there is no problem. All we need to manage the economy and manage it properly is reserves that can cover at least three months of import. And in fact, as it is, $10bn or $12bn can give us reserve coverage of four months.”

The CBN chief said the Investors and Exporters foreign exchange window had performed beyond the bank’s expectations, adding that forex inflows in the past few months were huge.

Nnanna stated, “Our exchange rate is convergent; we are getting southward. In the IMF, they talk about the need to have one rate. The one rate can happen organically or inorganically. For us at the CBN, we believe that organic convergence is the way to go. Inorganic convergence, which is forced, will always produce an arbitrage and that we don’t want.

The President, CIBN, Prof. Segun Ajibola, said a flexible exchange rate was helpful in an environment that lacked hiccups in forex management and supply strategies.

He stated, “But in an environment that is so susceptible to the vagaries of foreign exchange market, in terms of inflow of foreign exchange income and over-reliance on basic items for importation, you run the risk of allowing the exchange rate to go to the rooftop, if you free it absolutely.

“Normally, you hardly find any economy where the foreign exchange management succumbs totally to the forces of demand and supply. The best that we have seen is managed floating, which is what the Central Bank of Nigeria introduced in February this year. But as the economy stabilises and is diversified, and as we see more sources of forex earnings stabilising, especially the non-oil export, then we can be more and more flexible in our foreign exchange management policy.”’