Naira Extends Gains, Moves Towards Convergence With FX Rate for Invisibles

Now N380-N385/$1 as CBN pumps another $100m into market Law professor, Azinge, warns against politicisation of central bank

Currency speculators and others who had stockpiled the greenback continued to count their losses yesterday, when the naira extended its gains on the parallel market and inched closer towards a convergence between the street price for the dollar and the rate offered by the CBN for invisible transactions.

The naira sold for between N380 and N385 in Lagos yesterday, stronger than N399 from the previous day.

The FX rate for invisibles has remained at N375 since the Central Bank of Nigeria (CBN) announced new policy measures for the FX market a month ago.

The central bank also sustained its intervention by auctioning an additional $100 million through wholesale FX forwards to banks for onward sale to their customers in all sections of the economy.

Of the $100 offered by the CBN, $91 million was taken up by currency dealers.

Confirming this, CBN spokesman, Isaac Okorafor said dealers would get value for their respective bids today.

He disclosed that the highest and marginal bid rates were N330/$1 and N320/$1, respectively, adding no intervention was made by the central bank to meet requests for invisibles yesterday.

On the parallel market, the nation’s currency has appreciated by 27 per cent, or about N140, from N525 to a dollar a month ago.

The central bank has been intervening aggressively on the official market in recent weeks, leading to a narrowing of the gap between the official and parallel market rates.

CBN Governor, Mr. Godwin Emefiele on Tuesday expressed optimism about the convergence of the rates on the official and parallel markets, stating that the gains made by the naira against the greenback in recent weeks was not a fluke.

Emefiele said he was happy that the central bank’s intervention was yielding positive results.

But THISDAY gathered yesterday that while the central bank has succeeded in substantially clearing backlog of dollar demand for retail invisibles, it was falling short of meeting the FX demand for capital repatriation and other wholesale invisibles.

A chief executive of one of the leading banks in the country, who confirmed this in a chat, however pointed out that this could be a strategy by the CBN.

“While the CBN has done a lot in the past one month, we must not forget that there is a backlog of investors who are trying to repatriate capital that has not been settled.

“The CBN was focusing on trade transactions previously and recently on school fees, PTA/BTA. But foreigners who had invested in bonds, equities and need to repatriate dividend payments are still behind on the queue.

“I want to assume that once the central bank sorts out the retail invisibles, it would start to attend to FX demand for capital repatriation,” the bank CEO who did not want his name in print said.

The country’s external reserves, meanwhile, closed at N30.347 billion yesterday.

‘CBN Must Not be Politicised’

Meanwhile, a professor of law and Senior Advocate of Nigeria (SAN), Prof. Epiphany Azinge has advocated for the complete independence of the CBN.

This came against the backdrop of the reported call by the Minister of Finance, Mrs. Kemi Adeosun for the reduction of powers of the central bank.

The minister was reported to have blamed the CBN for the disconnect between the fiscal and monetary policies of government.

Azinge, while speaking yesterday as a guest on Arise News Network, the sister broadcast arm of THISDAY, said the call was unprecedented.

He said: “In line with global best practices, we came to the stage where it was widely agreed that the independence of the CBN was very, very important and critical for the sustenance of the monetary policies of this country and to that extent, the Act clearly stipulated that there shall be an independent body known as the CBN that will be free to discharge its functions. And that independence is very critical.”

According to him, “Firstly, the substantive law in force hinders towards the 1991 Act which we operated from many years until the coming into force of the 2007 Act, which is the extant law for now.

“What that means is that before promulgating the 2007 law, a lot went into it in terms of discussions, conversations, analysis and what have you.

“Also, we must have it at the back of our minds that it’s something that has resonated over the years. Scholars have obviously engaged in this discussion for a very long time and generally, the consensus at this point in time is that independence is very, very fundamental.”

He was of the view that the minister’s argument that the CBN needs more checks and balances holds no water, adding that it would only amount to undue interference.

“The last thing that we should be thinking of is the politisation of such a body, because the core mandate of the CBN is such that once it is subordinated to politisation, obviously everything is thrown out of the window,” he added.

Azinge explained that the issue of formulation and implementation of policies by the finance minister maybe at the realm of government and have nothing to do with the core mandate of the body charged with the responsibility of ensuring price and monetary stability, among other functions, including the issuance of legal tender.

On the checks and balances inherent in the CBN Act, Azinge said: “The composition of the board that is charged with the responsibility of supervising the CBN, as it were, is quite clear.

“There is a chairman aside the governor, we have four deputy governors, there is also the permanent secretary of the Ministry of Finance who is on the board. Then there is also the Accountant General of the Federation.

“So that essentially gives the minister a seat. Whatever you want to do can be done through the instrumentality of your permanent secretary who is possibly there in a representative capacity,” said the professor.

He further stated that minister’s statement might not get the backing of legislature and expressed doubt that the National Assembly would respond to her call to reduce the powers of the CBN.

“Even at that, that will be subjected to a lot of serious debate and I don’t think that much can come out of it. Because again, the CBN governor reports to the president on some of the issues and of course, the National Assembly is there with oversight functions, so they are also in a position whereby reports can also be made available to the National Assembly.

“So, there is no complete disconnect. But to think that the Minister of Finance is in charge of finance and to that extent, the CBN should be subordinated to the whims and caprices of the minister as the case maybe, to me, is not the right idea,” he said.

He added: “When we are talking about power, we should at any point in time be thinking of the equivalent in other jurisdictions and climes. Even starting from Africa and all over the world, the modules that we are practicing is fashioned along the lines of modules all over the world.

“And I believe for now, we are inline and in conformity with the best practices and to that extent, we are on the right course.”

He said though the presidency might have the best of intentions, the management of the economy, especially with respect to monetary policies, should be left to technocrats to handle.

“I believe that we have more than competent hands, in terms of technocrats to handle that. I believe that it is better to allow the technocrats to run the issue of monetary policies in this country,” he maintained

Recalling that from 1991 to 2007, monetary policies in the country experienced fits and starts, Azinge noted that from 2007, the former CBN governor Prof. Chukwuma Soludo was able to re-engineer the whole process by getting the National Assembly to come to terms with the reality that Nigeria was off the mark and it needed to align with global practices.

“And from 2007 to 2017, which is about ten years or thereabout, I don’t think that we have missed out much in the process,” he said.