Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, says the nation’s external reserves will rise to $40 billion in 2018 to give room for a stronger naira.
Emefiele also signalled change in monetary policy stance in 2018 subject to continued decline in inflation rate. He made these projections in Lagos, on Friday night, in a keynote address delivered at the annual Bankers Dinner of the Chartered Institute of Bankers of Nigeria (CIBN).
Speaking on the outlook for the economy in 2018, the CBN governor expressed optimism that the nation’s macroeconomic condition will improve barring unforeseen external shocks.
On the foreign exchange front, Emefiele said: “Foreign exchange (FX) reserves will continue to grow. Over the last 12 months, Nigeria’s FX reserves grew by over $10 billion from just over $23 billion in October 2016 to over $33 billion in October 2017. It is my belief that if we remain resolute with our efforts, policies and actions, we can attain an FX reserve position of about $40 billion by the end of 2018.
“As we entrench and sustain the transparency in the FX market, as FX reserves accretion continues, and market conûdence and improved sentiments remain, I expect that the exchange rate will not only be stable but would begin to appreciate against major currencies. The adverse competitiveness outcome which such appreciation may entail would be adequately mitigated by proactive policies to ensure that our balance of payments position is not undermined.”
He predicted the consolidation of the economic recovery experienced this year, saying: “As the sentiments improve in the macroeconomy and supported by proactive monetary, trade, industrial and fiscal policies, I expect a continued uptick in Gross Domestic Product (GDP) growth with a positive spill over to improved unemployment rate. As policies to strengthen the agricultural and industrial sectors become more emergent, growth in these sectors will rise, further bolstering overall economy.”
‘Change in monetary policy likely’
Emefiele signalled the possibility of change in monetary policy in 2018 from the current tight policy stance to an expansionary stance. He said: “Monetary policy stance could change when the underlying fundamentals become supportive. If the pace of disinûation becomes adequate and we see inûation at predicted levels, I am very optimistic that MPC may begin to see strong justiûcation for an easing of monetary policy, which may further accelerate the recovery process.”
‘Forex restrictions reduce monthly import bill by $3.6bn’
The CBN governor pointed out that the modest improvements in macroeconomic indices recorded, this year, were facilitated by policy initiatives of the apex bank. He said, for example, that the foreign exchange restrictions on the “41” items led to reduction in the nation’s average month import bill to $1.9 billion in the first half of 2017 from $5.5 billion.
He said: “Our reserves have recovered signiûcantly from a low of just over $23 billion in October 2016 to over US$34.3 billion as of November 3, 2017. The accretion in reserves does not only reûect increased inûow but also our shrewd FX demand management strategy. When we introduced a policy restricting 41 items from our FX markets, we were called all manners of names. Today ladies and gentlemen, among the beneût of that policy is the considerable decline in our import bills. From an average of about $5.5 billion, our monthly import bill has fallen consistently to US$2.1 billion in 2016 and $1.9 billion by half year 2017.
“We have also seen a sharp drop in imports of rice from several countries. To give one example, data from the Thailand’s Rice Exporters Association indicate that in 2012, about 1.2 million Metric Tonnes of rice was exported to Nigeria. However, in 2016, which was the ûrst full year of implementation of our policy, rice exports to Nigeria had fallen by 99 percent to only 784 Metric Tonnes. This signiûcant reduction in imports of rice from Thailand represents a saving of over $600 million to Nigeria in 2016 alone.”