Our Strict Policy on Forex is to Preserve Naira Value, Says CBN Governor
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The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, on Wednesday explained that the strict policy of the apex bank on Forex was mainly for the protection of the value of Naira as well as ensure a favourable eternal reserve position.
Emefiele said it was important to always have external balance, adding that this could be without compromising internal balance need and macroeconomic stability.
Speaking on the occasion of the Regional Course on Exchange Rate Regimes and Policies, organised by the West African Institute for Financial and Economic Management (WAIFEM), he said the CBN exchange rate management was simply to allow the market system to determine the exchange rate parity in what will be devoid of speculations and rent seeking.
He added that for developing economies which include Nigeria with high demand for imports, an appropriate exchange rate was very important to safeguard capital outflow for the sake of external reserves.
Emeifele who was represented on the occasion by the CBN Deputy Director, Monetary Policy Department, Mrs. Omolara Duke, said, “For the advanced economies, the exchange rate regime galvanises towards the floating regime, as the majority of them have convertible currencies and are therefore less exposed to the vagaries of currency fluctuations”.
He continued, “Developing economies are more cautious towards protecting their economies from adverse movements of convertible currencies which they trade with and therefore avoid regimes that will expose them to speculative attacks and currency crisis and desire to promote long-term growth.
“The choice of their exchange rate regime consequently tilts toward preventing massive capital inflows and currency crises and promoting trade.
“The choices of an exchange regime that will achieve exchange rate stability, capital mobility, and independent monetary policy simultaneously often leave a decision to achieve two out of these three outcomes. An exchange rate regime, therefore, must be credible and reflect the underlying fundamentals of the economy.
“Countries rarely take the extremes of the regimes, that is the fixed or the free-floating except in certain cases. Most countries exhibit some control over their currencies within the broad spectrum of the two extremes.”
Emefiele said it was important to always have external balance, adding that this could be without compromising internal balance need and macroeconomic stability.
Speaking on the occasion of the Regional Course on Exchange Rate Regimes and Policies, organised by the West African Institute for Financial and Economic Management (WAIFEM), he said the CBN exchange rate management was simply to allow the market system to determine the exchange rate parity in what will be devoid of speculations and rent seeking.
He added that for developing economies which include Nigeria with high demand for imports, an appropriate exchange rate was very important to safeguard capital outflow for the sake of external reserves.
Emeifele who was represented on the occasion by the CBN Deputy Director, Monetary Policy Department, Mrs. Omolara Duke, said, “For the advanced economies, the exchange rate regime galvanises towards the floating regime, as the majority of them have convertible currencies and are therefore less exposed to the vagaries of currency fluctuations”.
He continued, “Developing economies are more cautious towards protecting their economies from adverse movements of convertible currencies which they trade with and therefore avoid regimes that will expose them to speculative attacks and currency crisis and desire to promote long-term growth.
“The choice of their exchange rate regime consequently tilts toward preventing massive capital inflows and currency crises and promoting trade.
“The choices of an exchange regime that will achieve exchange rate stability, capital mobility, and independent monetary policy simultaneously often leave a decision to achieve two out of these three outcomes. An exchange rate regime, therefore, must be credible and reflect the underlying fundamentals of the economy.
“Countries rarely take the extremes of the regimes, that is the fixed or the free-floating except in certain cases. Most countries exhibit some control over their currencies within the broad spectrum of the two extremes.”
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