International trade has started picking up following the Central Bank of Nigeria’s steady dollar supply into the foreign exchange market.
The Chief Consultant of Biodun Adedipe Associates Limited, Mr. ‘Biodun Adedipe, said that due to the economic recession, the current import figure was a decline from the $14.171bn (or monthly average of $4.724bn) recorded in the first quarter of 2015.
He said that foreign trade had picked up since the first quarter of last year, with imports declining.
Adedipe spoke on the theme: ‘Nigerian Economy: First Half 2017 and Outlook’ at a forum organised by the Finance Correspondents Association of Nigeria.
According to the expert, the ongoing spike in naira exchange rate is being caused by the pressure on the CBN by several stakeholders to adopt flexible exchange rate system and freely float the naira.
Adedipe said, “The call to freely float the naira is huge aberration, as there is no country that freely floats its currency (even the US) – the job of the central bank is to defend and protect its currency by intervening in the markets as necessary. The voices are coming from too many experts that know nothing other than to echo what the Breton Woods institutions have said.”
The CBN, he said, had the capacity to sustain the ongoing foreign exchange interventions despite the pressure on the foreign exchange reserves.
He said the exchange rate had gradually depreciated and been devalued to N168 to dollar at the end of 2014; N197 to dollar at end of 2015; N305 to dollar at the end of 2016 and N305.85 to dollar as at July .
The economist said Nigeria’s total import figure for the first half of this year was N2.2tn ($7.218), with an average monthly figure of $2.406bn.
On the interest rate, he said the Monetary Policy Rate, which is the benchmark rate, was raised to 14 per cent per annum in July 2016 from 12 per cent per annum.
The expert said that changes in the MPR had not sufficiently impacted bank deposit/lending rates as well as changes in banking credit volumes.
According to Adedipe, maintaining the MPR at 14 per cent on the argument of inflation risk, stabilising the exchange value of the naira and bond prices is more counter-productive to domestic productive activities than to investment in financial instruments.
“It only extenuates government’s cost of borrowing and makes government’s debt instruments very attractive to astute investors. This long spell of fixed MPR is also gradually making the rate to lose its strategic relevance as a signal rate,” he said.