The Governor, Central Bank of Nigeria (CBN), Mr.Godwin Emefiele, has disclosed that the monetary authorities opted for maintaining stable exchange rate for the nation’s currency rather than building the foreign reserves in view of the far-reaching benefits of the adopted option for the economy.
Emefiele gave this hint on Sunday while briefing journalists on the outcomes of the Nigerian delegation’s meetings with investors and economic stakeholders at the International Monetary Fund (IMF) and World Bank Group (WBG) Annual Meetings which ended today in Bali, Indonesia.
The apex bank governor noted that developing economies and markets had suffered from a plethora of macroeconomic challenges over the past few years, including the depletion of their foreign reserves and not just depreciation.
Specifically, Emefiele explained that Nigeria, as other emerging markets nations, had lost foreign reserves, though only marginally, due to the fact that the country had managed to sustain stability in its foreign exchange market.
The banker clarified: “We are very conscious of the need to build buffers but unfortunately I must say that we are in the period where it will be difficult to talk about building reserve buffers.
“We can only build reserve buffers if we want to hold on to the reserve and then allow the currency to go, and wherever it goes is something else.
“So it is a choice we have to make and at this time the choice for Nigeria is to maintain a stable exchange rate so that businesses can plan and we do not create problems in the banking system assets”, Emefiele added.
He pointed out that one of the takeaways from the meetings was the advice by the IMF and the World Bank to national governments on the need for them to build country-specific policies and fiscal and structural reforms that would grow their economies and alleviate poverty.
Commenting during the briefings, the Minister of Finance, Hadjia Zainab Ahmed, said that the latest World Bank’s Human Capital Development Index (HCI) which ranked Nigeria at 44 percent was disheartening but assured that government would take steps to reverse the poor rating.
She explained: “We admit that this pervasive action was due to long years of under-investment in human capital, which we have before now realised and for which we have been addressing.
“Apart from major policy actions, some decisive actions are being taken to address the situation”, Ahmed added.
The minister disclosedthat the Nigerian delegation met with representatives of Fitch and Moody’s rating agencues during the IMF/World Bank meetings and presented to them the summary and synopsis of the recent economic and financial developments in Nigeria.
Ahmad said that the meeting with the rating agencies’ representatives enabled them to critically and objectively evaluate Nigeria’s credit worthiness.