Foreign reserves hit $31.175bn
Leading economist and Chief Executive Officer of Financial Derivatives Company( FDC), Bismark Rewane, has restated his call for fuel subsidy removal as panacea for attaining naira stability.
He contended that, with subsidy retention constituting 15 per cent of Nigeria’s import bills, its removal would enhance the ability of the monetary authorities to defend the naira. President Muhammadu Buhari has said that the arguments for oil subsidy removal presented to him were not convincing and deep enough to warrant his administration to stop subsiding the consumption of oil.
But speaking yesterday at the annual seminar for finance correspondents/ business editors holding at Calabar, cross River state, Bismark warned,” If fuel subsidy is not dealt with, policy modifcation will not yield the desired result. Fuel subsidy constitutes 15 per cent of Nigeria import bills.
Remove subsidy, aberrational demand pressure disappears”. The expert, who spoke on “Evolution of the foreign exchange market in Nigeria and the way forward”, said, “Whether we like it not, the subsidy would have to go because if we don’t remove it, it will kill us.” Indeed, stressing that the naira is currently in disequilibrium, he predicted that due to the economic economic realities staring the country in the face, the naira would be devalued in one form or another by the end of September.
He warned that if oil prices drops below their current level, the amount of adjustment that would have to be done on the naira would be greater than what would be required if the adjustment was done now.
Rewane said, “If subsidy is not removed, it will make the adjustment of the naira more painful because the role of the CBN is to manage the exchange rate with the reserves at its disposal.
The more autonomous and independent a CBN is, the more investors would be attracted to invest in the economy.” He faulted the argument that the removal of subsidy would hurt the poor, noting that apart from the enormous savings that the country will make from the removal of subsidy, the subsidy regime was so riddled with massive corruption that its removal will bring significant benefits far beyond economic dimensions.
The FDC boss stated that Nigeria being an oil dependent economy, the exchange rate mirrored movement of oil prices at the international market adding that, the nation faces a dual problem of resources and management problem.
Speaking earlier on this year seminar topic, “The impact of crude oil prices on external reserves and exchange rate management in Nigeria”, CBN Director of Corporate Communications, Mr. Ibrahim Muazu, said the choice of topic for this year seminar was not only apt but timely considering the recent dwindling global oil prices and its effects on the country’s economy. “
It has become imperative to direct our attention to this topical economic issue considering your role in enlightening and educating the general public with regard to measures that have been taken by the relevant authorities in dealing with the challenges of managing the country’s exchange rates and external reserves”, Muazu said.
Meanwhile, Nigeria’s foreign exchange reserves maintained their upward trend for the fourth straight week, expanding by US$ 2.175billion from the end of June to US$ 31.175billion on July 28, according to latest data obtained from the Central Bank of Nigeria (CBN) website.
The reserves have been rising steadily since the end of June, when they stood at $29billion, a development, analysts attribute to the efforts of the present government to plug leakage and demand management by the apex bank.
As part of a series of restrictive measures that the apex bank introduced to stem the depletion of the country’s foreign exchange reserves occasioned by the sharp drop in oil prices, the regulator last month banned importers of 41 items from accessing foreign exchange from the official Inter-bank Foreign Exchange Market (IFEM).
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