Ahead MPC meeting, Nigeria’s foreign reserves cross $45bn

…As Naira remains stable across forex segments

…Investors record $212.58m turnover in one day

Motolani Oseni

Ahead of the Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN) in Abuja this week, the nation’s external reserves under the care of the Apex Bank last week crossed the $45 billion mark, even as the Naira remained stable across foreign exchange segments.

The latest external reserves figure is the highest since September 2018, appreciating by 4.4 per cent or $1.89 billion from $43.12 billion it opened in 2019.

It is, however, worthy of note that the foreign reserves has been on a steady increase since February this year, amidst increase in global oil prices and increased inflow of foreign exchange from Diaspora.

For instance, the foreign exchange buffer closed February at $42.97 billion but moved to $44.43 billion in March.

The steady increase pushed the foreign reserves to $45.2 billion as of March 21, 2019, a 6.73 per cent increase from $42.35 billion at end-February 2019. In April, the apex bank foreign exchange buffer closed at $44.8 billion.

The Director, Banking Supervision, CBN, Alhaji Ahmad Abdullahi, had said the nation’s economy has developed despite the global and domestic challenges.

According to him, “investors’ outlook and confidence have increased despite challenges. The lending rate in the banking industry has increased and between January and March of this year, we have seen an inflow of $6 billion into the economy despite election tension.”

The Monetary Policy Committee (MPC) members of the CBN at the last meeting noted with satisfaction, the continued stability in the foreign exchange market at the Investors’ and Exporters’ (I&E) window of the market.

They also observed the moderate improvement in oil prices and stable accretion to foreign reserves.

Meanwhile, the third MPC is taking place this week, starting from May 21- 22.

At the last meeting, the MPC voted to adjust the Monastery Policy Rate (MPR) by 50 basis points from 14 to 13.50 per cent, first time in over two and a half years.

The members also retained the asymmetric corridor of +200/-500 basis points around the MPR; retained the Cash Reserve Ratio at 22.5 per cent; and retained the Liquidity Ratio at 30 per cent.

The CBN governor, Mr. Godwin Emefiele, at the end of the meeting stated that MPC members noted the constraints imposed on fiscal policy and the associated vulnerabilities as it has consistently failed to mobilise sufficient revenues to support development as enunciated in the ERGP, leaving room for continued debt financing, not previously envisaged.

He said: “Against this backdrop, it is imperative for monetary policy to provide the much-needed leverage to support output growth and employment generation in the country.

“On a more cautious note, the Committee expressed concern and sympathises with the fiscal authorities, over the growing fiscal the deficit, external debt and debt service, and urged the need to closely monitor the public procurement process in order to improve efficiency in public resource management.

“On financial system stability, the MPC noted the improvements in key financial soundness indicators and commended the Federal Government for the settlement of a debt owed to oil marketers, which has considerably, helped in reducing the non-performing loans (NPLs) portfolio of the banking industry.

In the communiqué, he said: “The Committee, therefore, urged the Government to expedite action in settling all outstanding contractor-related arrears so as to improve the NPLs position and stabilise the banking system.

In addition, the MPC reiterated the Bank’s commitment to improve credit delivery, especially to small and medium scale enterprises, while acknowledging efforts by the CBN in coordinating the de-risking of lending to the private sector through the collaboration between the Bankers’ Committee and NIRSAL.

“In its consideration of the best monetary policy option, the Committee noted the need for all agencies of Government to work hard, not only in consolidating the growth so far achieved but also in ensuring that appropriate policy are put in place and implemented to create jobs on a mass scale and diversify the economy in a proper direction.

“In doing this, the policy options facing the MPC at this meeting is a decision between retention of the current stance of monetary policy or a slight loosening of the policy rate, backed by the substantial stability of the major macroeconomic indicators.

“The Committee felt that given the relative stability in the key macroeconomic variables, there is the need to signal a new direction that is pro-growth.

“In its arguments, the Committee was convinced that doing this would further uphold the Bank’s commitment to promoting strong growth by way of encouraging credit flow to the productive sectors of the economy.

“The MPC felt that signalling through loosening by a marginal reduction would serve to manage the sentiments in the capital markets owing to the wider spread in yields in the EMDEs, relative to the advanced economies. Moreover, the real interest rate in the country would still remain positive.”

However, Investors and Exporters (I&E) FX segment recorded total transactions turnover of $212.58 million on the last trading day of the week under review, as the Nigeria local currency, Naira stood steady at N360.50 to the dollar.

At the CBN official rate, the Naira closed at an unchanged rate of N306.95 per dollar, but seen at N359 against the dollar at the Bureau De Change (BDC) FX segment.

Meanwhile, President, Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji (Dr.) Aminu Gwadabe, has advised over 4,500 Central Bank of Nigeria (CBN)-licenced BDCs to create or activate over 4,000 official/ corporate emails on its platform and stop use of Yahoo and Gmail for official communication.

He said: “We are also glad to inform the gathering that over 1,000 BDCs in the South-west have been integrated with the new CBN Forex return rendition platform.

In due course, our members in the other zones shall be integrated to achieve online real-time return rendition to CBN from the comfort of their offices. ABCON has created over 4,000 official emails on its platform www.abconng.org for its members to enhance compliance.”

Gwadabe said ABCON proactiveness in the automation of its members’ operations, has paid off, as all BDCs now have opportunity to re-active their official e-mails on the ABCON platform.