Professor Adegbemi Onakoya, an expert in quality systems management and business transformation, has said that the CBN’s recent circular on harmonizing reporting requirements for foreign currency exposures of banks has boosted activity in the Nigerian Autonomous Foreign Exchange Market (NAFEM).
Prof. Onakoya shared this insight on Saturday during the Nairametrics Economic Outlook webinar, which focused on the policies of the Central Bank of Nigeria (CBN) and their impact on the economy. He suggested that the recent policies aimed at strengthening the Naira seem to be effective.
He pointed out that the CBN’s January 31 circular to banks, titled “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks,” which mandated the harmonization of reporting and required banks to maintain adequate stocks of high-quality liquid foreign assets, like cash and government securities, in each significant currency, has increased transparency in the foreign currency market.
Prof. Onakoya noted that this directive led to a surge in activity in the Nigerian Autonomous Foreign Exchange Market (NAFEM), with daily turnovers reaching about $854 million in a week, signifying a fourfold increase.
- “In January 31 letter to banks on harmonization of reporting and the requirement of foreign currencies. Again, bringing transparency into the foreign currency market. At least we know we are owing.
- “Essentially, the directive spurred increased activity in the Nigerian Autonomous Foreign Exchange Market (NAFEM).
- “We now see daily turnover of about $854 million in a week. That is about $1 million in a week. About four times increase,” Onakoya stated.
Other CBN policies aimed at strengthening the Naira
Apart from the CBN’s January 31 circular, Prof. Onakoya pointed out several other recent policies by the Cardoso-led Central Bank of Nigeria that have been instrumental in strengthening the Naira. He mentioned the CBN’s January 29 circular, which authorized dealers to conduct all financial market transactions on a “willing buyer, willing seller” basis to promote price transparency.
Additionally, he referred to the policy that revised the guidelines for international money transfer services to Nigeria and the removal of allowable limits on the exchange rates quoted by international money transfer operators as being effective in strengthening the Naira.
Other recent policies of the CBN that Prof. Onakoya noted as being effective in ensuring the strength of the Naira include the removal of spread on foreign exchange transactions as well as the mandatory reporting on foreign exchange transactions.
- “The CBN appears to be on track with respect to the foreign exchange market,” he said.
