Some members of the Monetary Policy Committee (MPC) of the Central Bank (CBN) have expressed worries regarding the impact of huge demand pressure on Nigeria’s foreign exchange market.
The MPC members made their concerns known in their personal statements at the last meeting of the monetary authority obtained from the regulator’s website on Wednesday.
Forex demand pressure had stayed amid tapering inflow to foreign reserves as well as shrinking private inflow, said Edward Adamu, CBN’s deputy governor, corporate services directorate.
He observed that the local currency exchange rate had been strained by speculation, frivolous demands and even legitimate forex demand, adding that foreign exchange demand relies on naira liquidity.
“It is therefore pertinent to properly guide the flow of liquidity to those activities/sectors that promote growth and employment using instruments that can target productive activities, rather than those that ease credit creation generally.”
Kingsley Obiora, who is CBN’s deputy governor of economic directorate, noted that the apex bank had taken steps to achieve stability and eradicate the disequilibrium between foreign exchange demand and supply.
“In order to support the naira, we must also continue to build a Nigeria that meets the needs of all citizens.
“Foreign school fees and medical expenditures account for a non-negligible share of FX purchases from the CBN’s foreign reserves.
“Rather than exerting pressure on the naira to provide for the needs of the privileged few, imagine a Nigeria where all citizens have access to high-quality schools and hospitals within the country.”
Dr. Obiora believed inclusive expansion and a sustainable and robust naira would be spurred by providing these essential needs and increasing local production capacity.
“While measures to curb speculative, and even precautionary demand for foreign exchange is important, a more beneficial long term goal should be to expand the number of domestic projects and economic activities that generate more foreign exchange or that are import substituting.
“There are currently very limited investible options for domestic economic agents,” said Adeola Adenikinju, another member.
Professor Adenikinju avowed that banks had to create more products, which would leverage the liquidity in the economy.
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