By AbdulRahman Obaje
The Executive Director of the Osun River Basin, Mr Ayobami Oyalowo, has said that some interventions by the Federal Government have stabilised the Foreign Exchange (FX) market and the naira.
In a statement by Oyalowo on Monday, he said rather than defending the naira as claimed by some Nigerians, the Central Bank of Nigeria (CBN) took specific measures to support the naira, which were yielding the desired results.
Oyalowo, who is also a banker, finance expert, political and development economist said that it was important to understand the difference between “defending” and “supporting” a currency.
He said defending a currency implied artificially pegging it to a specific value, regardless of market forces, which was the practice under the previous CBN leadership.
According to him, supporting a currency, on the other hand, as the current CBN leadership has done involves taking steps to ensure a healthy and functional market.
He said this includes clearing backlogs of FX, increasing liquidity, and allowing the market to determine the exchange rate.
“The current CBN has allowed for ‘price discovery,’ letting the market decide the true value of the Naira,” he said.
Oyalowo said one of the measures taken by the government was to clear backlogs of FX, which had accumulated under the previous leadership of the CBN.
“This meant they had promised to provide dollars to businesses and individuals, collected the naira equivalent, but hadn’t delivered the actual dollars.
“The current CBN leadership cleared approximately 7 billion dollars of these outstanding commitments. This is a crucial step in restoring confidence in the market,” said the expert.
He said the CBN also injected around two billion dollars directly into the FX market, by selling dollars to banks to meet the demand, improving liquidity and ensuring businesses and individuals could access the foreign currency they needed at official rates.
Oyalowo, a former banker, said the country also borrowed four billion dollars through bond issuance, and that this injection of foreign currency boosted the supply of dollars to the FX market.
By clearing the backlogs, Oyalowo said the CBN had fulfilled its existing obligations, restoring trust, and creating a more stable environment.
He said the direct intervention in the market has increased liquidity, making it easier for people to buy and sell foreign currency at official rates.
Overall, he said the CBN had sourced and deployed over eight billion dollars to stabilise the FX market by meeting existing obligations and increasing market liquidity.
“This can be viewed as “support” or simply ‘fulfilling obligations.’
“By clearing backlogs and improving liquidity, the CBN is taking steps to create a healthier and more transparent FX market, allowing the naira to find its true value,” said Oyalowo. (NAN)
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