Isaac Okoroafor, Corporate Communications Director of the Central Bank of Nigeria, has said Nigeria’s performance, compared to most emerging and frontier economies, has been impressive.
He stated this at the Abuja International Trade Fair, on Wednesday, noting that the consistent drop noticed in Nigeria’s foreign exchange reserves should raise no concerns, as the country has enough forex to purchase 17 to 20 months of exports.
According to Okoroafor, America’s decision to increase its money policy rate has affected emerging and frontier markets, noting that investors have pulled their funds out of economies like Nigeria’s, because of an assurance of more yield in the US.
His words: “The drop in our forex reserves is basically as a result of the capital flow reversals arising from rising interest rates in the United States. You will recall that the Federal Reserve has been raising rates and has even given guidance that this would continue in the near term.
“As a result of this, investments in the emerging and some frontier markets are gravitating towards the US market to reap higher returns. There is also the factor of election cycle. In Nigeria, however, we have done much better than most emerging and frontier economies.
“Some of these countries have suffered substantial depreciation in their currencies as a result of these flow reversals. For instance, since this year, Argentina has lost 134 per cent of its currency to depreciation largely occasioned by these reversals; Brazil lost 34 per cent; Turkey, 78 per cent; Iran, 25 per cent; South Africa, 19 per cent; Russia, 18 per cent; Pakistan, 17 per cent; United Kingdom, 3.7 per cent; Japan, 1.3 per cent; whereas Nigeria has gained six per cent by way of appreciation.
“The key reason is because the CBN adopted a forex management strategy that has worked successfully, achieving a comfortable stability in the exchange rates and still maintaining an equally comfortable reserves level.”