In a statement released on Monday, Oyalowo noted that contrary to claims by some Nigerians regarding the defense of the naira, the Central Bank of Nigeria (CBN) has implemented targeted measures to bolster the naira, which are producing positive outcomes.
Oyalowo, who possesses expertise in banking, finance, and political and development economics, emphasized the importance of distinguishing between "defending" and "supporting" a currency.
He explained that defending a currency involves artificially maintaining it at a fixed value, irrespective of market dynamics, a practice seen under previous CBN leadership.
In contrast, he described supporting a currency, as demonstrated by the current CBN leadership, as taking proactive steps to foster a robust and functional market.
This approach includes addressing FX backlogs, enhancing liquidity, and permitting the market to establish the exchange rate.
“The current CBN has allowed for ‘price discovery,’ letting the market decide the true value of the Naira,” he said.
Oyalowo stated that one of the actions implemented by the government was to address the backlog of foreign exchange that had built up during the prior administration of the Central Bank of Nigeria.
“This meant they had promised to provide dollars to businesses and individuals, collected the naira equivalent, but hadn’t delivered the actual dollars.
“The current CBN leadership cleared approximately 7 billion dollars of these outstanding commitments. This is a crucial step in restoring confidence in the market,” said the expert.
The CBN has reportedly injected approximately two billion dollars into the foreign exchange market by selling dollars to banks, thereby addressing demand and enhancing liquidity. This action has enabled both businesses and individuals to access the foreign currency they require at official rates.
Oyalowo, a former banker, noted that the country also raised four billion dollars through bond issuance, which further increased the supply of dollars in the FX market.
By addressing outstanding backlogs, Oyalowo stated that the CBN has met its prior commitments, thereby restoring confidence and fostering a more stable economic environment.
He emphasized that this direct market intervention has improved liquidity, facilitating the buying and selling of foreign currency at official rates.
In summary, Oyalowo mentioned that the CBN has sourced and allocated over eight billion dollars to stabilize the FX market by fulfilling existing obligations and enhancing market liquidity.
“This can be viewed as “support” or simply ‘fulfilling obligations.’
“By clearing backlogs and improving liquidity, the CBN is taking steps to create a healthier and more transparent FX market, allowing the naira to find its true value,” said Oyalowo.