Analysts: CBN Reforms Strengthening Investors’ Confidence in Economy

James Emejo in Abuja

Analysts yesterday said reforms currently introduced by the Central Bank of Nigeria (CBN) have continued to bolster investors’ confidence in the economy.

They specifically hailed the floating of the foreign exchange believing that issues concerning the supply side would be addressed in due course. 

In separate interviews with THISDAY, the analysts believed that though some of the current initiatives may not produce immediate gratification as expected, they hold much promise in the long run.

Wealth Management and Business Development Consultant, Mr. Ibrahim Shelleng, expressed confidence that the anticipated foreign exchange liquidity following the FX convergence would be achieved.

But he pointed out that investors were only awaiting the outcomes of a number of key policy directives on monetary and fiscal policy.

He also noted that rates would eventually stabilise and lead to greater FDI

He said, “I think the move to unify the FX rate was a no-brainer. The markets have reacted positively and it is a sign of things to come. The stock market has rallied to a 15-year high and the valuation of banking stocks is set to improve as well.

Also, the initial spike in rate is to be expected due to a backlog of demand and Hajj demand as well. Rates will eventually stabilise and lead to greater FDI.”

Also, Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, described the reforms as welcome developments, adding that their outcome may not yield the immediate desired results in the short run.

He said, “In the long run, however, these reforms are expected to derive positive outcomes. Currently, we are experiencing traction in the investor confidence already manifesting in the capital market and other markets.

“We, however, need to take insecurity very seriously in order to get optimum investment benefits from these reforms.”

Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, said the reforms have begun to yield positive results already.

He said, “We have started seeing positive signs in the economy especially the Capital market where investors’ confidence has been rekindled.

“The I & E window has also recorded significant FX transactions since the new FX policy started.  The Importers & Exporters window exchange rate is also gradually converging with the black market rate which is also a very positive sign.”

He added that “Economic experts have also asserted that the CBN is going in the right direction as regards its recent policies. 

“We will wait for the outcome of the next MPC meeting as regards what the new position on interest rates.”

The acting CBN Governor, Mr. Folashodun Shonubi, had recently abolished the segmentation in the foreign exchange (FX) market and collapsed all rates into the Investors and Exporters (I&E) window – to the excitement of investors and analysts.

Among other immediate reforms, the CBN under Shonubi, also announced the cessation of the RT200 Rebate and Naira4Dollar Remittance Schemes, with effect from June 30.

Both initiatives, introduced by the suspended CBN Governor, Mr. Godwin Emefiele, were launched to boost non-oil exports and diaspora remittances to encourage foreign exchange inflows into the economy.

These initiatives had been highly commended and welcomed by analysts with early positive results since they were launched.

The initiatives in the FX market also led to the devaluation of the naira as the local currency became weaker against the US dollar.

The apex bank had explained that the policy changes introduced in the country’s foreign exchange market were meant to promote transparency, liquidity and price discovery in the FX market in order to improve supply, discourage speculation, enhance customer confidence as well as ensure overall stability in the FX market.

The CBN also announced that going forward domiciliary account holders are permitted to utilise cash deposits not exceeding $10,000 per day or its equivalent via telegraphic transfer.  CBN Director, Corporate Communications, Department, Dr. Isa Abdulmumin, in a statement issued after an extraordinary Bankers’ Committee meeting also said all visible and invisible transactions including medicals, school fees, BTA/PTA, airline and other remittances are eligible for the Investors’ and Exporters’ (I & E) window.

As a result, he said Deposit Money Banks (DMBs) shall ensure expeditious processing of all eligible invisible transactions on behalf of their customers using the applicable rate at the I & E window.

The central bank director pointed out that the meeting had discussed the policy implementation and implications for the banking public.