Economy

Economy expert urges FG to save declining foreign reserves

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Leshi Adebayo

The Head of the Economics Department, University of Ibadan, Professor Bola Adenikinju has stressed the need for the Federal Government to boost foreign exchange supply to the economy, saying it remains a challenge.

This is coming after the Central Bank of Nigeria (CBN) released a data showing that Nigeria’s external reserves lost $400m in 17 days even when it was recorded that it rose by $5.05bn in October 2021.

According to the CBN data, it was revealed that the reserves dropped to $41.50bn on November 14 from $41.79bn on November 1.

Reacting to this report in an interview with The PUNCH, Professor Adenikinju said, “Given the four major sources of expanding supply: oil exports, foreign capital flows, remittances and non-oil exports, foreign portfolio investments, while desirable, is, however, very fungible.

“Oil exports are similarly very volatile. The long-term interests of the country would be served by encouraging remittances and non-traditional exports. Hence, suggestions to nationalise remittances will be counterproductive to the economy in the long term.”

The university don advised that Nigerians should be urged to bring their funds into the economy by excluding any uncertainty around the ownership and management of such funds.

Adenikinju also encouraged the CBN to conduct studies to enhance a better understanding of how the foreign exchange market works in Nigeria, with much focus on the microeconomic factors determining the behaviour of economic agents in the market.

He noted, “In the light of the above, I would like to make the following recommendations: First, given the limited options open to the bank to expand foreign exchange supply in the near term, there is a need to carry out a comprehensive study of foreign exchange market operations in Nigeria with a view to determining the fundamental drivers, and relative sizes of the segments of the foreign exchange market in Nigeria.

“In addition, there must also be effective monitoring of the DMBs to close loopholes for shady practices, collusion, and round-tripping.”

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