Bismarck Rewane, a prominent Nigerian economist and CEO of Financial Derivatives Company Limited, appeared on Arise News to address the controversy surrounding the Central Bank of Nigeria’s (CBN) reported expenditure of $8 billion to support the Naira. This figure, initially mentioned by him in a Channels Television interview on Friday, went viral, sparking significant public backlash due to concerns over reserve depletion. Rewane’s interview aimed to clarify misunderstandings, defend the CBN’s actions, and provide a detailed economic rationale, emphasizing that such interventions are both necessary and aligned with the bank’s mandate.
CBN’s Mandate and Role
The CBN’s primary responsibilities/core mandates include
- Ensure monetary and price stability
- Issue legal tender currency
- maintaining external reserves to safeguard the international value of the Naira
- Promoting a sound financial system
- Act as a banker to the federal government and other banks.
Rewane highlighted that using reserves to support the Naira aligns with the third mandate of the apex bank, especially given the currency’s 26.35% undervaluation based on purchasing power parity (PPP) analysis, with a fair value of 1,102.15 NGN/USD. “The federal government of Nigeria is intervening to safeguard, to stabilize, to protect the value of the Naira, that is exactly what they are supposed to do.” Rewane stated.
This undervaluation suggests that CBN supporting the Naira is good at correcting a misalignment, which Rewane argued is a positive economic move.
Rewane argued that the CBN’s intervention was systematic and effective, reducing the gap between official and parallel rates to less than 1%, compared to previous disparities of 10-20%. This has led to a more transparent market, with a balance of trade reaching $18.6 billion, the highest in a long time, driven by increased exports and reduced imports. Money supply growth also decreased from its peak at 85% to17% just 2% above the average growth rate, aiding inflation control, while projects like the Dangote Refinery enhanced export capabilities.
Naira Trend in 2024
Rewane reflected on the trend of Naira against the dollar in 2024, and as of this time last year (February 2024), the CBN intervened with a 400 basis points increase in interest rates, a move not seen in a long time. He mentioned the exchange rate was around 1,910 NGN/USD in February 2024, and appreciated to 1,200 NGN/USD, But one thing was missing “The Central Bank did not come up with a program as to a planned schedule of intervention” he stated.
The Naira depreciated to its peak of 1915NGN/USD in February 2024 and then dropped sharply appreciating back to 1125NGN/USD in April same year and then stabilizing around N1500 to N1700, currently at N1505NGN/USD today’s rate.
He highlighted that the naira’s value is not important to investors but rather its stability, and that is the responsibility of CBN to create that stability through interventions.
He then addressed the million-dollar question are these policies working? And his answer was “Yeah. And are they for the good of the country? Obviously, policymakers and politicians are very sensitive. Everything is seen in the context of a political struggle, but I think we can discount that.”
He had predicted earlier in 2024 that the Naira would trade at N1550 in 2025 and it has gone beyond that, and we should not get carried away, work needs to be done. “The important thing is that the policies are working, too” and that “to represent it in any other manner would be doing injustice to, one, the goals of the government, and two, to the splendid role which the Central Bank has done, how they’ve gone so far to achieve this.”
Current Economic Indicators
As of February 21, 2025, the Naira showed improvement, trading at 1,502 NGN/USD on the official market and 1,510 NGN/USD on the parallel market, surpassing the November 2024 prediction of 1,550 NGN/USD.
Foreign exchange reserves stood at $38.73 billion on February 20, 2025, down 5% from $40 billion at the year’s start, with an import cover of nine months.
The current account balance was $6.06 billion in Q3 2024, indicating a relatively stable economic position.
International Comparisons
To contextualize the $8 billion, Rewane compared it to other nations: the UK spent $27 billion defending the pound in the 1990s, China $1.02 trillion for the yuan, Russia $80 billion, Switzerland $480 billion, and Japan $135 billion. He noted that $8 billion is “peanuts” in comparison, especially since the Naira is undervalued, making the intervention appropriate.
Rewane clarified that the $8 billion comprises $4 billion borrowed in two tranches from the Eurobond market for general purposes, including fiscal deficit support, and a $4 billion drawn from reserves, from a peak of $42 billion to $38 billion. This usage aligns with the CBN’s role to intervene and support the undervalued naira and not for unrelated activities like space exploration.
Addressing Public Misunderstanding
Rewane attributed the online cacophony to ignorance, quoting Martin Luther King Jr. and Alfred Whitehead to underscore the dangers of misinformation. He urged that Nigerians need to be enlightened on CBN’s management of the affairs of the economy He urged patience, noting a lag between policy implementation and impact, and called for fiscal authorities to coordinate and block leakages, emphasizing that the policies are working for the common good.
Rewane asserted the policies are working, with stability improving investor confidence, crucial for economic growth. He noted a lag between policy implementation and impact, calling for patience and coordination with fiscal authorities to block leakages.
He affirmed that the Central Bank was resolute in not bringing down rates at a time when it could have been said to do so. Their interventions are not being wasted; policies are working. CBN’s current interventions are better now than they were three years ago. The CBN’s third core mandate is to use international reserves to support and defend the value of the legal tender, which is the naira. He concluded “that is precisely what they are doing. That is what they have done. And that is what I think they will continue to do.”
Rewane’s clarifications reveal that the CBN’s $8 billion intervention is a strategic move to stabilize an undervalued Naira, aligning with global practices and yielding positive economic outcomes. While public misunderstanding persists, education and patience are key to appreciating these efforts, with ongoing coordination needed for sustained progress.
