Central financial institution interventions will stabilise naira – PwC

Professional companies agency, PwC, has acknowledged that the interventions by the Central Bank of Nigeria will stabilise the naira in the long term.

That was indicated in its newest Nigeria financial outlook, titled ‘Navigating economic reforms’.

PwC stated, “Interventions by CBN might trigger the Naira to stabilise within the long-term. However, these interventions might turn into subdued within the absence of improved capital flows and export proceeds to the overseas reserves.

“Capital importation increased by six per cent to $1.1bn in Q4 2023 from $1.0bn in Q2 2023. The increase was driven by the growth in Foreign Portfolio Investments (189 per cent increase from $106.9m to $309.8m) and Foreign Direct Investments (113.9 per cent increase from $86m to $183.9m) between Q2 and Q4 2023.”

It added that the rise in FPIs was pushed by a rise in flows to cash market devices whereas FDIs have been pushed by flows to fairness investments.

“Capital importation may continue to improve in 2024 due to the policy actions by the CBN aimed at rebuilding investor confidence. Some of the actions implemented by the CBN include settling FX backlogs, increasing MPR to 26.25 per cent to maintain price stability, etc,” the report added.

In May, the Monetary Policy Committee of the CBN raised the benchmark lending fee to 26.25 per cent, citing the necessity to rein in inflation.

However, quite a few the members of the committee additionally expressed considerations concerning the illiquidity within the overseas trade market, which had fuelled volatility out there.

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In their statements, the MPC members stated there was a have to maintain a decent financial coverage stance to make home yields extra enticing for home and overseas traders.

A member of the committee, Emem Usoro, who voted to boost the MPR by 150 foundation factors to 26.25 per cent, averred that additional tightening of the monetary situations would scale back the unfavourable curiosity hole and entice extra capital inflows to stabilise the naira trade fee.

She defined, “Sustaining a decent financial coverage stance doubtlessly makes home yields extra enticing for home and overseas traders, helps the naira and accretion to the exterior reserves. It additionally helps tame imported inflation, which is essential given the import-dependent nature of the Nigerian financial system.

“Looking ahead, the home outlook stays cautiously optimistic, because the financial system is projected to broaden within the close to time period. This outlook is hinged on fiscal reforms, infrastructural growth initiatives, efforts towards steady deepening of the monetary markets by way of FCY-denominated debt devices, constructive expectations round crude oil costs, elevated home oil manufacturing, and graduation of operations on the Port Harcourt refinery.

“Additionally, a tight monetary policy stance is expected to support this outlook by attracting more capital inflows to improve accretion to reserves. Inflation is, however, expected to remain elevated, but commence moderation in the second half of the year, due to the tight monetary policy, and base effects.”

Meanwhile, the Chartered Institute of Directors has expressed concern over the rising departure of multinational corporations from Nigeria, attributing it to foreign exchange points, insufficient energy provide, and inconsistent authorities insurance policies.

In its ‘Position Paper on the Exodus of Multinationals from Nigeria’ signed by its Director General/Chief Executive Officer, Bamidele Alimi, CIoD prompt methods the federal government may reverse the development.

On foreign exchange, CIoD stated, “Improving foreign exchange policies is another key intervention. The CBN should adopt more flexible foreign exchange policies to ensure businesses can access foreign currency more easily. This could involve creating a more transparent and market-driven exchange rate system.”



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