By Emmanuel Adeleke
The governor of Central Bank of Nigeria (CBN), Godwin Emefiele, has said Investors and Exporters (I&E) Forex Window initiative has attracted over $50 billion investment in the past three years.
Emefiele disclosed this at the opening of regional course on exchange rate regimes and policies organised by the West African Institute for Financial and Economic Management (WAIFEM), in Abuja.
He said the apex bank introduced the Investors and Exporters (I&E) Forex Window to enable investors and exporters purchase and sell forex at the prevailing market rate.
“This has attracted over US$50 billion in investment to the country within three years,” he said
Explaining the rationale behind the operation of different exchange rate regimes, Emefiele explained: “Our choice of exchange rate regime(s) has at all times been determined by the prevailing economic fundamentals.
“It is not uncommon that the dynamics of the external and domestic economy lead to a change in regime. Indeed, global economic and financial crisis, pandemics, currency crisis, commodity supply shocks and geopolitical tensions to name a few have determined the choice of our exchange rate regime.
“For emerging developing economies like Nigeria where the demand for imports remains high, an appropriate exchange rate regime is required to safeguard capital outflow and ring-fence the external reserves,” the CBN governor said.
“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.
“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.
“In the case of Nigeria, the overarching goals of the Central Bank of Nigeria, is to achieve exchange rate stability that ensures a viable external sector; anchor inflationary expectations; improve and support economic growth.
“The objectives of the exchange rate policy in Nigeria, therefore, are to preserve the value of the domestic currency, maintain a favourable external reserves position and ensure external balance without compromising the need for internal balance and the overall goal of macroeconomic stability,” Emefiele added.
Speaking on the issue of exchange rate regimes in the West African sub-region, WAIFEM Director-General, Dr. Baba Musa, said: “If governments opt to sustain an independent monetary policy, they must allow their currencies to float.”
“The economics and politics of monetary and exchange rate policy are likely to be very different in an open economy than an economy that is not.
“In as much as international economic integration involves increased exposure to international financial and commercial flows, it heightens the concerns of those involved or exposed to international trade and finance.
“It should be noted that all the currencies in WAIFEM member-countries are non- convertible hence the importance of policy-makers to appreciate the skills necessary to manage exchange rates,” Musa said.