简体中文
繁體中文
English
Pусский
日本語
ภาษาไทย
Tiếng Việt
Bahasa Indonesia
Español
हिन्दी
Filippiiniläinen
Français
Deutsch
Português
Türkçe
한국어
العربية
Abstract:On Sunday, Dr. Muda Yusuf, Director/CEO of the Centre for the Promotion of Private Enterprise (CPPE), urged the monetary authorities to develop a long-term intervention framework to ensure that the current volatility in the foreign exchange market is moderated.
implores CBN to improve oversight of forex requests
On Sunday, Dr. Muda Yusuf, Director/CEO of the Centre for the Promotion of Private Enterprise (CPPE), urged the monetary authorities to develop a long-term intervention framework to ensure that the current volatility in the foreign exchange market is moderated.
The CPPE Director stated that despite the restrictions on the supply of foreign exchange, the system needs to be handled in a way that would not erode investors' confidence because a decline in confidence leads to speculation and changes expectations, both of which in turn lead to a variety of responses among economic participants.
Mr. Yusuf claimed in a statement titled “The Naira Exchange Rate Conundrum” that while the volatility in the foreign exchange market is unsettling by nature, it is not surprising given the market's long history of distortions and that it would take time to correct the entrenched distortions.
He acknowledged that there are a lot of reasons putting pressure on the foreign currency market, but noted that there had been an odd uptick in monetary expansion over the previous month.
Money supply increased by an extraordinary 15% in one month between May and June 2023, according to Mr. Yusuf. From N55.7 trillion to N64.9 trillion, broad money increased by nearly N9 trillion. This acceleration of economic growth is unparalleled. This must have had an impact on the currency rate, of course.
The monetary authorities should look into this sharp increase in the money supply and take action to prevent further expansion. The macroeconomic stability, particularly price stability, is significantly threatened by this astronomical expansion in the money supply.
The head of CPPE noted that due to extreme illiquidity in the foreign exchange market over the past few years, there had been a backlog of unmet foreign exchange demand totaling billions of dollars. With a more liberalized foreign exchange market, the pressure of the backlog of unmet demands and other maturing forex-related obligations has been unleashed on the investors and exporters window.
Transitioning from a restrictive market environment to one that is more liberalized “could be a source of market instability,” he continued. To stop dubious capital outflows or speculative attacks on the currency, caution is necessary. A free market does not necessarily imply total deregulation. To stop illicit financial flows, a suitable regulatory framework must be added to free enterprise.
It is clear that the Central Bank of Nigeria's (CBN) intervention in the foreign exchange market has slowed down compared to the first five months of the year in terms of frequency and extent.
Recent CBN projections suggest that in 2022, the CBN will intervene in the foreign exchange market to the tune of $17 billion. This amounts to N1.4 billion on average each month. It is unlikely that we have witnessed an intervention totaling up to $1 billion since the start of the current administration. It was anticipated that the volatile would decrease as the intervention's scope improved.And just lately, the government settled matured debt payment obligations on Eurobonds for $500 million. This might potentially operate as a supply-side constraint.
“The media unfairly emphasized the slight loss in foreign reserves. Additionally, this led to some nervousness, which may have fostered speculative activity on the FX market. Mr. Yusuf reiterated that the CPPE believes the Tinubu administration is on the right track and that the current volatility in the foreign exchange market are issues normally inherent in a significant policy transition, noting that ”in a couple of months, we expect the instability to subside.
On the supply side, he claimed that the trend was one of improved oil output, which would increase foreign exchange revenues.
According to him, the pressure on foreign exchange demand from petroleum product imports will be reduced by the expectations of increased local refining of petroleum products in the upcoming months. Increased investor confidence will increase foreign portfolio investments, foreign direct investment (FDI), and other remittances.
He continued, CBN should exert better monitoring on forex demands to ensure that the market is protected from speculative attack and illicit money outflows.
Disclaimer:
The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.
PT. Doo Financial Futures, a subsidiary of the global financial services brand Doo Group, has secured regulatory approval from Indonesia’s Badan Pengawas Perdagangan Berjangka Komoditi (BAPPEBTI).
In the first 11 months of 2024, Malaysia recorded 5,685 investment scams, with Telegram emerging as the most commonly used platform for fraudulent activities.
IQ Option is catching our eye as it seems to be a trending topic. For those who want to know whether IQ Option is a reliable broker, WikiFX made this article to help you better understand this broker.
Before executing any trade, traders should pause and ask themselves critical questions to ensure they are making rational and well-informed decisions. Here are five questions to help you reflect on your strategy, manage risk, and control emotions before entering the market.