CBN Releases 2018 Economic Forecasts, Targets $40bn For External Reserves

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The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, has released the apex bank’s economic forecast for 2018, even as he announced that the country’s external reserves would hit $40bn next year from $34.3bn as of November 3, 2017.

Mr Emefiele made this known on Friday in the apex bank’s economic forecast for 2018, while also announcing that inflation rate might drop from the current 15.98 per cent to a single digit.

The Punch reports that he hinged his forecasts on the foreign exchange and exchange rate management policies of the apex bank in recent months, which has led to a drop of 65 per cent in the monthly food import bill of the country from an average of $5.5bn to $1.9bn as of June 2017.

The CBN governor released the forecasts at the Chartered Institute of Bankers of Nigeria Annual Bankers Dinner in Lagos in a speech tagged ‘Policy Options for Sustaining Nigeria’s Economic Upturn.’

According to the CBN governor, the economy has recorded some remarkable improvements in recent times and if the pace continues, the apex bank will adopt a growth-focused monetary policy stand that will see more credit to the economy.

Emefiele said, “We have also seen a significant appreciation of the naira from over N500/$1 to about N360/$1. In addition, we have seen stability in the rate for over six months now. I am glad to note that the exchange rate is not only stable, it is also converging across various windows and segments of the market.

“Since the establishment of the I&E Window, we have recorded about $10bn in autonomous inflows through this window alone.

“This reflects the effect of the increased transparency which that window accords the FX market and its benign impact of improving investors’ confidence and business sentiments. Our reserves have recovered significantly from a low of just over $23bn in October 2016 to over $34.3bn as of November 3, 2017.”

“Today, among the benefits of that policy is the considerable decline in our import bills. From an average of about $5.5bn, our monthly import bill has fallen consistently to $2.1bn in 2016 and $1.9bn by half year 2017. This is indeed commendable.”

“I expect that barring any unforeseen shocks, inflationary pressure will continue to ease; I believe that it may return to very low double-digit or high single-digit levels during the next year. Though the base effect had diminished, I expect that as the socio-economic factors that are driving food inflation are resolved, the inertia therein would dissipate and the pace of headline disinflation will grow.

“Foreign exchange reserves will continue to grow. Over the last 12 months, Nigeria’s FX reserves grew by over $10bn from just over $23bn in October 2016 to over $33bn in October 2017. It is my belief that if we remain resolute with our efforts, policies and actions, we can attain an FX reserve position of about $40bn by end 2018.”

“Exchange rate stability will continue. As we entrench and sustain the transparency in the FX market, as FX reserves accretion continues, and market confidence and improved sentiments remain, I expect that the exchange rate will not only be stable but would begin to appreciate against major currencies.

“The adverse competitiveness outcome, which such appreciation may entail, would be adequately mitigated by proactive policies to ensure that our balance of payments position is not undermined.

“Monetary policy stance could change when the underlying fundamentals become supportive. If the pace of disinflation becomes adequate and we see inflation at predicted levels, I am very optimistic that MPC may begin to see strong justification for an easing of monetary policy, which may further accelerate the recovery process.”

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