Home OPINION COMMENTARY Appraising Nigerian External Reserves Position, By Joseph Orjime

Appraising Nigerian External Reserves Position, By Joseph Orjime

CBN Governor, Godwin Emefiele

When the Governor of Central Bank of Nigeria Mr Godwin Emefiele was appointed on the 3rd of June, 2014 to head the apex bank it was obvious that he needs to think outside the box to salvage the nation’s financial sector.

This is given the numerous challenges that confronted the financial sector that time. For instance, as at May 20, 2014, stakeholders in the financial sector had expressed concern over the drop in fiscal buffers stating that the development had exposed the economy to weaknesses arising from both domestic and external shocks.

Nigeria’s reserves which are pivotal to defending the Nation’s currency opened the year at $34.4 billion and officially closed at $29.8 billion representing a 15.4% year on year drop. However, analysts believe the reserves are probably less than $20 billion if we net off currency swaps used by the CBN.
But Emefiele upon resumption hit the ground running by introducing certain reforms in the Nigerian financial sector. Key among these reforms include pursuing gradual reduction in key interest rates to include unemployment rate in monetary policy decisions, maintain exchange rate stability and aggressively shore up foreign exchange reserves, and building sector-specific expertise in banking supervision to reflect loan concentration of the banking industry. The balance in reserves may have been worse had it not been for the CBN’s introduction of the managed float policy back in February 2015.

Others include, abolishing fees associated with limits on deposits and consider ongoing practice in which all fees associated with limits on withdrawals accrued to banks alone: introducing a broad spectrum of financial instruments to boost specific enterprise areas in agriculture, manufacturing, health, oil and gas.
The policy placed restrictions on dollar transactions in Nigeria barring a list of 41 items from accessing the official window. The CBN also restricted deposit and withdrawal of forex by depositors from commercial banks.

Despite huge challenges which include fall in the global price of crude oil, Mr Emefiele, alongside his team of professionals at the CBN, has recorded notable milestones. Prominent among these achievements include Financial Systems Stability.

The CBN has successfully regulated the activities of Bureaux de Change (BDCs) to effectively scrutinize rent-seeking among the operators, depletion of the foreign reserves, unauthorized financial transactions, and dollarization of the economy, among others.

For instance, out of 130 BDCs sampled based on volume of purchase from banks, as at the time of the reforms, the bank found 121 BDCs, representing 93%, to be in breach of the objectives and provisions of its guidelines.
Another notable milestone recorded by Emefiele and his team is in the area of banking supervision. In order to achieve the mandate of ensuring safety and soundness of the financial system, CBN conducted a Risk-based examination of all banks with High and Above Average Composite Risk Rating in the previous years.

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Also on the list of CBN’s achievements include consumer protection. The bank has refunded over N4.01 billion to bank customers based on complaints resolved and directives communicated to them following the Consumer Compliance Examinations and a Spot-check conducted on the banks.

 It concluded full deployment of the Consumer Complaint Management System CCMS with the migration of all banks to the live platform of the system.
The giant strides recorded by the CBN under Emefiele cannot be complete without the mention of a revolution in the Gross External Reserves which rosé by 11.3 per cent to US$38.21 billion at end-November 2017 above the US$34.33 billion at end-October 2017.

The rise was attributed to receipts from Eurobond Proceeds, crude oil exports, foreign exchange purchases and third party receipts.

A breakdown of the external reserves by ownership showed that the share of the Federation reserve was US$2.39 billion 6.2%, Federal Government reserves US$10.31 billion (27.0%), and the CBN reserves, US$25.51 billion (66.8%) of the total reserves.

Consequent upon the reforms introduced by Mr Emefiele, Nigeria’s external reserves has now risen to $46 billion. The CBN spokesman, Mr Isaac Okoroafor confirmed this development recently to newsmen in Abuja.

According to the image maker, the reserves grew by about $3.2 billion between February and March 2018.He said that the reserves at the beginning of 2018 stood at $39.3 billion then rosé to $42.8 billion in February before hitting the new high of $46 billion.

Mr Okoroafor attributed the continued accretion to the country’s reserves to the bank’s effort at vigorously discouraging unnecessary importation and reducing the nation’s import bill, inflow from oil and non-oil exports, as well as the huge inflows through the investors and exporters’ window of the foreign exchange market.

Emefiele’s performance at CBN over the years indicates that he and his team have ensured stability in the sector, in spite of global and domestic challenges.
Analysts are of the opinion that the bank under his watch is really on the right track to guaranteeing the soundness and stability of the Nigerian financial system.
There is no doubt that Emefiele has made his mark financial management of this country. Right from his hay days as Managing Director/ Chief Executive Officer of Zenith Bank, Mr Emefiele has distinguished himself as a guru in growing financial institutions from the cradle, and also consolidating on the successes recorded there from.

Now saddled with the sacred responsibility of regulating the Nigerian economy as the governor of the CBN he has brought his experience to bear on the steady growth witnessed these past years in his office.

Joseph Orjime, a journalist and public affairs analyst, wrote in from Abuja.