The successful conduct of the general elections is rubbing off positively on investments, with the inflow of over $6 billion into the local bond market.
Central Bank of Nigeria (CBN) Governor Godwin
Emefiele described the foreign capital inflows to the bond market as an
indication of the continued investors’ confidence in the strength of the
economy.
The CBN boss, who spoke yesterday at the BusinessDay
Post-Election Economic Agenda Conference in Lagos, also set a
post-election agenda for the nation’s monetary policy. The current
policy stance of the bank is expected to continue while inflation is
estimated to rise to 12 per cent and moderate thereafter.
Emefiele
said the Nigeria bond market remains one of the most attractive
investment destinations – In Bloomberg’s Emerging-Market Local-Currency
Government Bonds index, which covers major emerging markets, including
Nigeria, South Africa and Argentina.
He said Nigeria’s bond
continue to top the chart due to the stability of the Investors’ &
Exporters’ Forex rate and the yields being high by emerging-market
standards.
Investors, Emefiele said, are sure that they can exit
their positions if they want, which has been crucial in driving other
investors into the market.
Emefiele hinged the monetary policy stance of the bank on rising inflation expectations.
He,
however, noted that the bank would adjust the policy rate in line with
unfolding conditions and outlooks. Just as in the previous year, he said
the Bank would continue in its drive to ensure that the policy interest
rate is set to balance the objectives of price stability with output
stabilisation.
The CBN boss also explained that since the
establishment of the I&E Window in April 2017, the country has
recorded about $35 billion in autonomous inflows through the window
alone.
He said: “As a result, exchange rate pressures eased
considerably across all markets as the rates converged to about N360/$
and the distortive premium almost eliminated. At the Bureau De Change
(BDC) segment, we saw a significant appreciation of the naira from over
N525/$ in February 2017 to about N360/$ today. Rates at the I&E
window also appreciated from nearly N382/$ in May 2017 to just over
N360/$.”
On the exchange rate policy, he said the bank, despite
the expected pressures from the volatility in the crude oil markets,
will maintain its stable exchange rate over the next year.
“Gross
stability is projected in the foreign exchange market, given increased
oil production and contained import bill”, he said.
Emefiele
expressed optimism that the country’s Balance of Payments would remain
positive in the short-term, adding that the current account balance
could improve further if oil prices continued to recover. He assured
that this would be “supported by improved non-oil performance as
diversification efforts begin to yield results to reduce undue imports.”
Warning
that the issues that led to the economic crisis between 2015 and 2017
remained visible, Emefiele stressed the need to significantly increase
the country’s policy buffers, including fiscal measure, to increase its
external reserve. He also reiterated the need to diversify the revenue
structure of the Federal Government, in order to reduce dependence on
direct proceeds from the sale of crude oil.
He further advised
that cheap financing be provided to boost local production of priority
goods in critical sectors of the economy in order to reduce reliance on
foreign imports.
He also used the platform to highlight the
efforts made by the CBN in the past five years in monetary policy and
development finance, disclosed that the weakening of the Naira impacted
the balance sheets of domestic banks.
However, he said the bank
took some measures such as monitoring the financial position and
performance of supervised institutions and the assessment of the risk
profile and governance management practices of banks, to guarantee
financial stability.
He listed other efforts carried out by the
Bank to ensure financial system stability and the promotion of
sustainable economic development to include the establishment of the
investors and exporters’ window; conservation of foreign exchange
through the restriction of access to foreign exchange on 43 items; and
increased lending to the agricultural and manufacturing sectors.
The
governor, while soliciting continued support for the policy measures
that restrict import of items that could be produced in Nigeria as well
as increased penalty for smuggling of restricted items in Nigeria,
expressed optimism that the Nigerian economy in post-May 2019 will
witness growth and reduced unemployment.
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