The Central Bank of Nigeria (CBN) has linked the recent depreciation in the value of the naira to the effects of the COVID-19 pandemic on the nation’s economy.
The apex bank’s Deputy Governor, Corporate Services Department, Mr. Edward Adamu, was reported by the News Agency of Nigeria (NAN) as making the disclosure during an interactive session with the House Committee on Finance on the 2022-2024 Medium-Term Expenditure Framework/Fiscal Strategy Paper (MTEF/FSP) on Monday in Abuja.
The banker told the lawmakers that the exchange rate was dependent on the forces of demand and supply in the foreign exchange (forex) markets, saying that Nigeria is sourcing forex from three main avenues, namely crude oil sale, foreign portfolio investment inflows and remittances.
He clarified: “We have proceeds from the sale of crude oil, we have foreign portfolio inflows and remittances; those are the three major ways that we get forex.
“Crude oil sale has not been as high as we all will want it to be and obviously in the aftermath of COVID-19, the global economy grounded to a halt and the use of crude oil was also halted.
“To the extent that sometimes in April last year, we had crude oil selling at a negative, which means that people were being paid to store what they bought and so that the avenue for forex inflows was significantly reduced.
“You go on to foreign portfolio inflows, you notice that investors also settled their affairs on the side of caution and so, once COVID-19 outbreak occurred, they moved out about $120 billion from emerging markets to safe havens in America and Nigeria is one of those countries from where monies were withdrawn.
“On the side of remittances, once our brothers and sisters abroad were not working because of the situation they found themselves; they had very little to send to us here and so, we also saw remittances reduced.
“On the demand side, we saw speculative demand on the side of Nigerians, if you needed a truck of goods, because you are not sure of the uncertainties of COVID, you wanted to get three trucks.
“All these pressures on both the demand and supply side, the availability of dollar became more difficult and we had a decline or depreciation in the value of the naira”, Adamu added.
The Deputy Governor, however, further pointed out that a lot of efforts by the monetary authorities and the recent upswing in the global economic system were helping oil prices and remittances to recover.
According to him, this is why the apex bank’s management is happy that the exchange rate has stabilised somewhat as it is a moving target, but it has stabilised in the import and export window for a while.
Reacting to the banker’s presentation, the Chairman of the committee, Hon. James Faleke, directed the CBN to present its audited account to the Office of the Accountant General of the Federation (OAGF) for scrutiny.
The lawmaker explained that information available to the committee showed that the apex bank was yet to turn in its audited accounts since 2010 and about N800 billion was yet to be remitted to the federation account.
In his response, the CBN Deputy Governor promised that the apex bank would interface with the OAGF and reconcile any difference in accounts after which, he said, the findings would be reported to the committee through the Minister of Finance within two weeks.
