Abuja: Mr Ayobami Oyalowo, the Executive Director of the Osun River Basin, has stated that interventions by the Federal Government have successfully stabilized the Foreign Exchange (FX) market and the Naira. In a statement made on Monday, Oyalowo emphasized that instead of merely defending the naira, the Central Bank of Nigeria (CBN) implemented specific measures to support the currency, which are now showing positive results.
According to News Agency of Nigeria, Oyalowo, who is also a banker, finance expert, and political and development economist, highlighted the importance of understanding the distinction between ‘defending’ and ‘supporting’ a currency. He explained that defending a currency involves artificially pegging it to a specific value, disregarding market forces, a practice previously observed under the former CBN leadership.
Oyalowo elaborated that supporting a currency, as the current CBN leadership has done, entails taking measures to ensure a healthy and functional market. This approach incl
udes clearing FX backlogs, increasing liquidity, and allowing the market to determine the exchange rate. ‘The current CBN has allowed for ‘price discovery,’ letting the market decide the true value of the Naira,’ he noted.
One of the critical steps taken by the government, as mentioned by Oyalowo, was the clearance of FX backlogs that had accrued under the previous CBN leadership. He explained that the CBN had made commitments to provide dollars to businesses and individuals, collected the Naira equivalent, but had not delivered the actual dollars. The current CBN leadership resolved approximately 7 billion dollars of these outstanding commitments, a move deemed essential in restoring market confidence.
Additionally, the CBN injected around two billion dollars directly into the FX market by selling dollars to banks to meet demand, thereby enhancing liquidity and ensuring that businesses and individuals could access foreign currency at official rates. Oyalowo also mentioned that the country borrowed four bil
lion dollars through bond issuance, further boosting the supply of dollars in the FX market.
By addressing the backlogs, Oyalowo stated that the CBN had fulfilled its obligations, reinstated trust, and fostered a more stable environment. The direct market intervention has increased liquidity, facilitating the buying and selling of foreign currency at official rates. Overall, Oyalowo emphasized that the CBN sourced and deployed over eight billion dollars to stabilize the FX market by meeting existing obligations and enhancing market liquidity.
‘This can be viewed as ‘support’ or simply ‘fulfilling obligations,” Oyalowo remarked. ‘By clearing backlogs and improving liquidity, the CBN is taking steps to create a healthier and more transparent FX market, allowing the Naira to find its true value.’