CBN Deputy Governor explains why its defending current exchange rates

The present stability in Nigeria’s exchange rate may continue to be maintained as the Central Bank of Nigeria (CBN) Deputy Governor Joseph Nnanna stated the nation’s foreign reserves had hit $34 billion and were sufficient to cover several months of import. Nnanna made this known at an event held in Lagos

“The sustainability is already evident, the reserves are growing. As I speak, the reserves are $34bn. When we had volatility, the reserves were as low as $20bn

What led to the rise ?

Crude oil prices have rebounded from a low of $40 a barrel to current levels of $60. Crude oil is Nigeria’s main source of foreign exchange earnings.

Why reserves are important

Nigeria relies a great deal on imported finished products and inputs for manufacturing.  Foreign exchange is largely sourced from the CBN. A foreign exchange crisis last year led to the apex bank managing supply and difficulties in accessing foreign exchange by most businesses. Sufficient reserves enable the CBN to keep the country’s exchange rates within a defined band.

From a peak of nearly N500 to a dollar, the Naira is currently trading at N363 at the parallel market. The apex bank has also made policies to converge both official and parallel rates by increasing dollar supply through commercial banks in the country.

The fluid exchange rate has also encouraged portfolio investors by foreign investors in the country, which has boosted stock market performance. An estimated $10 billion has come into the country through the Investors and Exporters window launched by the bank in April this year.  Year to date, the Nigerian stock market is up by over 30%.