CEM REPORT, ECONOMY | The Central Bank of Nigeria of Nigeria (CBN) has stated that Nigeria can double it’s gross domestic product (GDP) growth rate through the planned policies of President Bola Tinubu.
This is as the apex bank stated that it plans to implement more reforms in the next couple of weeks to reposition the local currency.
According to Kingsley Obiora, the Deputy Governor of the Central Bank of Nigeria, the nation’s GDP should approach $700 billion in 4 years.
He stated this in an interview with Bloomberg on Monday.
“Reforms being implemented by President Bola Tinubu may result in economic growth rate doubling next year from about 3 percent this year.
“From next year, when this president will have his own budget, his own policies will be fully on track, I completely expect us to do 5 percent to 6 percent growth next year.
“I completely expect us to do 5 percent to 6 percent growth next year.
“Over the next four years, you may see the GDP approach something like $600 billion to $700 billion.”
He continued by saying that the elimination of subsidies and the convergence of exchange rates will promote economic growth, particularly starting in 2024 when the reforms begin to take effect.
Recall that CEM stated that President Bola Tinubu established a goal to boost the country’s gross domestic product (GDP) growth rate by 6% (on average) over the course of the next four years by implementing budgetary changes intended to boost the real sector of the economy.
CEM also reported that KPMG Nigeria said the target “seems overly ambitious” and may be difficult to achieve.
Obiora added that the recently established monetary policy decision is a managed float rather than a free float.
He made it clear that the CBN does not plan to permit the Naira to float entirely freely, pointing out that no nation conducts a fully free float.
“There is no country in the world, even the US, that has a completely free float,” he said.
“It may be too early to determine if the naira’s exchange rate to the dollar has bottomed out.”
The deputy governor said the foreign exchange market is already operating on a willing buyer, willing seller basis; stressing that the central bank “has not entered the market as a buyer or seller”.
“We are allowing the market itself to set a price.”
“The central bank expects official and parallel-market exchange rates to converge soon. I don’t think it will take a long time for that to happen”
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The deputy governor also expressed caution in determining whether the exchange rate of the naira to the dollar has reached its lowest point, suggesting that it may still be too early to make such a determination.
Obiara highlighted IMF reports indicating that the naira should not be as weak as the parallel market showed, adding that he expects the supply of foreign cash to be released once the dollar price reaches a level that both buyers and sellers consider “fair.”
On June 14, the CBN announced the unification of all segments of Nigeria’s FX market, and the floating of the local currency.
The policy effectively collapsed all FX windows into the investors and exporters (I&E) window.
Similarly, on June 18, 2023, the CBN cancelled cash deposit restrictions on domiciliary accounts, thereby allowing customers to “have unfettered and unrestricted access to funds in their accounts”.
According to the CBN, the policy changes aim to promote transparency, liquidity, and price discovery in the FX market in order to improve FX supply, discourage speculation, enhance customer confidence and ensure overall stability in the FX market.
Other aspect of the policy include;
All visible and invisible transactions (medicals, school fees, BTA/PTA, airline, and other remittances) are eligible for the Investors’ and Exporters’ (I & E) window.
DMBs shall ensure expeditious processing of all eligible invisible transactions on behalf of their customers using the applicable rate at the I & E window.
Ordinary domiciliary account holders shall have unfettered and unrestricted access to funds in their accounts.
DMBs shall provide returns to the CBN including the purpose for such transactions.
Cash deposits into domiciliary accounts will not be restricted, subject to DMBs conducting proper KYC, due diligence, and adhering to the spirit and letter of extant AML/FT laws and other relevant rules and regulations.
The CBN will prioritize orderly settlement of any committed FX forward transactions as they fall due in order to further boost market confidence.
The Bank will normalize its CRR maintenance processes and ensure equity in its implementation across the banking industry.
This policy adjustment also implies that wired transfers into a deposit account has no limit.
The CBN also explains that Nigerians can deposit an unlimited amount of cash into their domiciliary accounts.
The new guidelines also mean Nigerians can now make forex transfers from one domiciliary account to another even if it is in another bank. This was previously not possible as transfers were only permitted within the same bank.
There used to be a cap on the amount of money Nigerians could withdraw from their domestic accounts. No one knew how much cash they could withdraw, which added to the confusion surrounding the restriction.
The ability to withdraw previously deposited funds was eventually limited to $10,000 per week or even per month, depending on the central bank policy in effect at the time.
