Why exchange rate remains high amid interventions

A mix of economic structure of the country, foreign exchange earnings capacity and outlook are keeping the naira value high despite interventions. The exchange rate of N197 per dollar, officially took a new turn at the wake of the adoption of the Flexible Exchange Policy of the Central Bank of Nigeria (CBN).

Presently, it is exchanged at N306 per dollar at the allegedly inaccessible interbank window; N360 per dollar at Invisibles Segment; N362 by the licensed Bureau De Change operators; N369.35 at newly inaugurated Investors and Exporters window; and N370 at the parallel (black) market.

But since February this year when CBN liberalised further the foreign exchange market, it has put no less than $5 billion, most of which are in forwards sales with maturity dates ranging 30, 45, 60 days to one year.

Despite the interventions, which hugely played a part in strengthening naira’s rebound from all-time low of N520 per dollar in February to N370 per dollar now, there are concerns that the exchange rate should have moderated to below N300 per dollar.

Besides, the decision to keep huge reserves, while the country shops around the world for debts at a cost to the economy has been queried, particularly the sustainability of the debts in the midst of dwindling national earnings.

A top source at the CBN said that just as the name “Foreign reserves” implies, it is official public sector foreign assets that are readily available to, and controlled by the monetary authorities, for direct financing of payment imbalances and directly regulating the magnitude of such imbalances, through intervention in the exchange markets to affect the currency exchange rate for other purposes.