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Naira better positioned to withstand external shocks, says Rewane

The economic thinktank team of the Financial Derivatives Company Limited, has said the Naira is now in a position to withstand external shocks but warned that the Central Bank of Nigeria ( CBN) must continue to supply liquidity in the foreign exchange market. The team led by FDC’s Chief Executive Officer, Mr. Bismarck Rewane, said the move by CBN to scrap the old official rate of N380/$ and adopting the I&E window rate of N411, led effectively to a 8.16 percent depreciation and resulted in a move towards convergence of the Naira both in the official and parallel markets.

The battle for the soul of the Naira was to be followed by an abrupt end to the BDC sale of forex at the retail market. “The CBN is gradually but surely moving towards a more market determined exchange rate mechanism, whilst protecting the naira from speculative attacks,” FDC said in its monthly economic review report for August. It however recommends that the focus of the Apex bank going forward should be towards maintaining competiveness of the Naira against its other major trading partners.

“The focus now will be maintaining the competitiveness of the currency against a basket of its major trading partners and adopting a crawling peg to ensure a fiscally neutral exchange rate.” “With the price of oil briefly touching a 24-month high ($76pb) and the OPEC quota up by 22%, the naira is in a fundamentally stronger position to withstand exogenous shocks and remain competitive. The big issue for the CBN is to increase dollar liquidity in the forex market,” FDC further disclosed. The economic pundits at FDC however noted that the gesture of the International Monetary Fund (IMF) to extend $3.35billion credit to Nigeria by Special Drawing Rights (SDR) is expected to boost liquidity and the external position of economy especially at a time of rising covid infections.

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