How Nigeria can achieve stability in forex management – ACTN

President, Association of Corporate Treasurers of Nigeria (ACTN); Ishmael Nwokocha (left), members; Dara Ogunseinde and Tumi Sekoni, Executive Secretary/CEO; Patrick Ajunwoko during the association’s breakfast meeting held in Lagos.<br /> 

Experts in the financial services sector have condemned the Central Bank of Nigeria (CBN) interference in the Foreign Exchange (forex) market, stressing the need for the apex bank to allow market forces to determine the value of naira.

The stakeholders, under the aegies of the Association of Corporate Treasurers of Nigeria (ACTN), said constant interventions from the CBN have created unnecessary market distortions.

Market distortion is any event in which a market reaches a market-clearing price for an item that is substantially different from the price that a market would achieve while operating under conditions of perfect competition

According to them, market forces should be allowed to determine the value of the naira, while the CBN should only intervene in the market when there are crises in the system.

Specifically, the Managing Director of Citi Bank, Akin Dawodu, urged the Central Bank to allow the forces of market to dictate the tune of the market to stabilise the naira rather than constant interventions.

Dawodu, who was represented by Hakeem Muhammed of the Corporate Sales & Structuring team, said: “CBN must not interfere in the market. It must allow the market to run naturally, and do not distort the flow of demand and supply. They must play low in the market and allow the market to dictate its tune.”

A member, Monetary Policy Committee, Dr. Doyin Salami, explained that Nigeria needed to improve in production and manufacturing to enable it export products that can attract more foreign currency into the country.

According to him, the nation cannot encourage manufacturers when there are no provisions for social amenities to boost production and increase output.

“With all these volatilities and uncertainties, how do you expect manufacturers to plan? The system must not create the opportunity for people to make money without engaging in production. There must be increase in production and exportation with less emphasis on import to attract more dollars into the country.”

The Vice President & Divisional Head, Corporate Planning, FMDQ OTC Securities, Kaodi Ugoji, said the pull of demand and the push of supply create price equilibrium.

“It is better to allow the market to determine the value of the naira. There is no reason the official rate should be different from the parallel market rate. There should be a level playing field for all operators.”

The CBN has been criticised for the manner in which it managed Nigeria’s foreign exchange (forex) market. One of the complaints is the directive by the CBN to commercial banks to allocate 60 per cent of their forex sales to the manufacturing sector and at the rate advised by the CBN.

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