Nigeria’s Forex Problem, Beyond CBN’s Capacity— Afrinvest

The Managing Director and Chief Business Officer of Optimus by Afrinvest, Ayodeji Ebo, has doubted the ability of the Central Bank of Nigeria to fix the country’s foreign exchange challenges.

Ebo said the CBN has no capacity to solve foreign exchange pressure on the economy saying the problem is ‘structural’.

He said, “We know the major source of FX for the CBN or for the government has dwindled significantly which is oil. We are all aware of the oil theft and the reduction in investment that is going on within that sector.

“And also looking at the external reserves in the last seven months, what we’ve seen that has led to the appreciation of the external reserves is the issuance of the Eurobond.”

Nigeria raised $4bn Eurobond in September last year and another $1.25bn in March.

The Minister of Finance Budget and National Planning, Zainab Ahmed, said the country is eyeing to raise a $950 bond.

He said, “Beyond that, external reserves would have depleted significantly. This is why the CBN wants to ration the external reserves to keep it at a comfortable level.

“So, as a result, it is really very obvious that Nigeria is in a tight situation regarding FX and this is beyond what the CBN can solve. It is more of a structural challenge.”

He said foreign exchange crisis requires attention, adding “we need to reduce oil theft such that we can see more inflow into our reserves.”

The CBN Governor, Godwin Emefiele, had during the 2022 World Bank/IMF Spring meeting in Washington said its policies would reduce the forex pressure.

Emefiele said, “With Dangote refinery coming up with the 650,000 barrel refinery, hopefully by around the end of the year, that will also hopefully reduce the demand for foreign exchange that normally will go for the importation of petroleum products.

“I have often said, between the importation of refined products alone into importation of rice or sugar or wheat, this consumes close to about 40 per cent of foreign exchange that is needed to fund import in Nigeria.

“If we find for instance a situation where by the end of this year (2022) we are no longer going to be needing foreign exchange to import petroleum products, I believe that demand will drop. As demand drops, what you will find is that whatever supply is able to match demand, we can see a stable exchange rate.”