{"id":165780,"date":"2023-11-15T15:00:44","date_gmt":"2023-11-15T14:00:44","guid":{"rendered":"https:\/\/newmail-ng.com\/?p=165780"},"modified":"2023-11-15T15:00:44","modified_gmt":"2023-11-15T14:00:44","slug":"cbns-prompt-action-to-clear-fx-backlog-instills-confidence-in-market-stability-sanusi","status":"publish","type":"post","link":"https:\/\/newmail-ng.com\/cbns-prompt-action-to-clear-fx-backlog-instills-confidence-in-market-stability-sanusi\/","title":{"rendered":"CBN\u2019s prompt action to clear FX backlog instills confidence in market stability – Sanusi"},"content":{"rendered":"
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Lamido Sanusi, the former emir of\u00a0Kano<\/a>, has commended the actions of the Central Bank of Nigeria (CBN) towards achieving stability in the foreign exchange (FX) market.<\/strong><\/p>\n

Speaking at the\u00a0MTN capital markets conference, an event organised by MTN Group on Tuesday, Sanusi said Nigerians\u00a0should expect a positive outlook before the end of this year.<\/p>\n

The former CBN governor also said the government must look at the reasons behind NNPC\u2019s lack of revenue remittances.<\/p>\n

\u201cFor the short term I dont think we have a problem, I think the CBN is doing the right things, clearing the backlog, trying to fund the market etc. I think we will have stability,\u201d he said.<\/p>\n

\u201cWhat we have to start talking about now is beyond the next 12 months because at the end of the day we got to look at the structural issues of NNPC not bringing in enough dollars to the CBN.<\/p>\n

\u201cThat has to be looked at and that is coming from three sources, one is the massive oil theft thats happening at the point of production which means the government have to look into security to make sure we do not lose the crude we are producing.<\/p>\n

\u201cThe second is lack of investment in onshore field, many of which are mature field with over seven decades already. The IOCs have exited them we need those who have taken over to invest.<\/p>\n

\u201dThe third is what the government has started on conversion to CNG, because when you move to alternate energy, and reduce your dependent on PMS, you are able to reduce your FX expenses, spending on energy, and reduce your fossil oil emission, and thats good for climate change.<\/p>\n

\u201cGiven what the current CBN is doing, I think we should take from this a very positive outlook for this country from as early as to the end of this year.\u201d<\/p>\n

\u2018CBN\u2019S WAYS AND MEANS POLICY LINKED TO INFLATION, NAIRA SLIDE\u2019<\/strong><\/p>\n

Sanusi also criticized the central bank\u2019s excessive ways and means lending to the federal government under the administration of ex-President Muhammadu Buhari.<\/p>\n

He said the CBN loan to the federal government triggered inflationary pressure in Nigeria and weakened the value of the Naira.<\/p>\n

Ways and means is a loan facility through which the CBN finances the government\u2019s budget shortfalls.<\/p>\n

The facility allows the government to borrow from the apex bank if it needs short-term or emergency finance to fund important projects.<\/p>\n

On May 3, the\u00a0senate approved\u00a0<\/strong><\/a>securitisation of N22.7 trillion CBN loan, a move that significantly increased the country\u2019s public debt.<\/p>\n

\u201cWe\u2019ve had eight years of rapid expansion of the central bank\u2019s balance sheet through ways and means. And that has fuelled inflation and weakened the currency. And that is the fact,\u201d Sanusi said.<\/p>\n

\u201cWhen interest rate go up, it increases the cost of government borrowing, and when your debt services to revenue ratio is already at 100 percent it further increases the money market rate and envelope the government balance sheet.<\/p>\n

\u201cSo the CBN is at this point, will need to mop up this money but it need to do it in a manner that minimizes the cost both to the CBN and the governmnet balance sheet. Thats why it needs to rely a little more on these \u201cnon-conventional instrument\u201d.<\/p>\n

\u201cIf you look at OMO Bills and OBB rates in the last few weeks, I can see that the central bank has started a process of aggressive tightening.<\/p>\n

\u201cOBB rates are beginning to approach what they should be. And I think that\u2019s what the market needs to look at; that the central bank is taking this role of tightening money and fighting inflation as a primary focus.\u201d<\/p>\n

According to the economist, it does not matter the instrument used, what is important is that the CBN recognises \u201cthat the excess money supply in the system needs to be mopped up in other to have stability in the currency\u201d.<\/p>\n

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