Mr. Ayobami Oyalowo’s insights on the recent interventions in Nigeria’s foreign exchange (FX) market provide a crucial distinction between “defending” and “supporting” the naira. The Federal Government’s measures, as outlined by Oyalowo, suggest a more sustainable approach than the artificial pegging of the naira seen in previous years.
The distinction he draws between defending and supporting the currency emphasizes the importance of allowing the market to determine the true value of the naira through mechanisms like “price discovery.” This more market-driven approach aims to ensure that the naira reflects its actual value rather than being artificially held at a certain level, which can create imbalances in the economy.
Clearing the FX backlogs, injecting liquidity into the market, and meeting outstanding obligations are key steps in restoring confidence and stabilizing the FX market. By fulfilling promises to provide dollars to businesses and individuals and ensuring that the demand for foreign currency is met through the CBN’s interventions, these measures help improve market transparency and ease access to the necessary foreign currency at official rates.
Oyalowo’s point about the CBN’s actions to inject around $8 billion into the market through various channels, including bond issuance and direct intervention, reflects a proactive strategy to stabilize the currency while restoring trust in the financial system.
These efforts could have far-reaching effects on Nigeria’s broader economy, as a more stable naira is critical for businesses, foreign investments, and day-to-day transactions. It seems that, rather than short-term fixes, the current approach aims to address structural issues in the FX market, ensuring long-term stability.
What do you think of this approach by the CBN? Do you believe it will lead to sustained stability in the FX market and the naira?
