As Emefiele Targets $40bn FX Reserves, CBN’s Strategy Becomes Apparent  

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• Reserves rise to $30.5bn as Bank assures importers’ demand will be met through FX forwards  
• Lobbyists eye central bank top jobs
By Obinna Chima   
The strategy adopted by the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele to rebuild the country’s foreign exchange reserves has been identified as one of the primary reasons the country’s Eurobond issue was oversubscribed by 780 per cent last week, THISDAY has learnt.
Investigations have shown that as of last week, Nigeria’s foreign reserves, which had hit $29.5 billion, climbed to $30.5 billion – the highest in more than 12 months – following the success of the Eurobond.
A CBN official, who accompanied Emefiele and others in the federal government delegation on the Eurobond road show to the United Kingdom and United States of America, informed THSDAY that the strategy adopted by the governor worked wonders in boosting investors’ confidence in the Nigerian economy and the country’s ability to meet its foreign obligations.
He also disclosed that with the single-mindedness exhibited by the CBN governor to rebuild FX reserves, he has set a target to grow reserves to $35 by the middle of 2016 and $40 billion by the end of the third quarter of this year.
The official, who preferred not to be named but is one of the architects of the central bank’s FX policy, held the view that contrary to the argument by several analysts that devaluing the currency and allowing a true float of the naira would attract foreign investors, it is actually the accretion of foreign reserves that would instill confidence in the economy.
“With a comfortable level of FX reserves, foreign investors will be assured that once they want to take their funds out, they can do so without hindrance.
“If you noticed, once reserves fell to as low as $21 billion, investors were not attracted to the Nigerian economy, irrespective of whether we devalued or whatever we did with the FX market.
“As long as they felt that you had insufficient reserves to meet your foreign obligations, they were not going to remain comfortable about investing in the Nigerian economy. They continued to exit the economy.
“For example, look at South Africa and Kenya which have floating exchange rates, yet they have found it difficult to attract investors. They continue to flee their economies in droves.
“However, since the International Monetary Fund (IMF) announced in November that it had approved a $12 billion standby facility for Egypt, the country has been attracting almost $300 million a month.
“What this means is that investors need to feel comfortable with your level of FX reserves and your ability to meet your obligations when they fall due.
“So instead of the CBN getting distracted by the debate over devaluation or no devaluation, it has focused on reserves accretion, which as you know help to attract investors during the Eurobond sale last week.
“Given what we know, the target by the CBN is to increase reserves to $35 billion by the middle of this year and $40 billion by the end of the third quarter,” he said.
The official said the accretion of FX reserves could be attributed to two factors – the improvement of oil prices following the agreement by OPEC and Russia to slash oil production by 1.2 million barrels per day, and the relative peace achieved in the Niger Delta.
“The oil price rally coupled with improved output from Nigeria have resulted in increased foreign earnings in recent months.
“If you recall, about a year ago, revenue from the sale of crude oil fell to less than $400 million a month, but now Nigeria is making between $600 million and $700 million, enabling the CBN to save more,” he explained.
He was quick to add, however, that whatever savings the central bank is making must be complemented by a comprehensive fiscal and industrial strategy by the ministries and agencies of government.
“A fiscal and industrial strategy is still required, because saving FX reserves alone will not give you the silver bullet,” he said.
The official also allayed concerns that the savings being made by CBN could delay payments of maturing trade obligations and in turn continue to exert pressure on the FX market.
He said: “The CBN remains committed to funding maturing trade obligations through FX forwards on the interbank market.
“Importers with eligible transactions have nothing to be concerned about, as the central bank will continue to support them through the forwards arrangement already in place on the interbank market.
“Also, confidence is growing that the speculative attacks on the naira in the parallel market would subside, because with the accretion of reserves, the CBN will have a schedule that would enable it to meet demand through FX forwards.”
Also, THISDAY learnt that with the tenure of two deputy governors of the Central Bank of Nigeria (CBN) gradually drawing to a close, some Nigerians have started jostling for the top jobs.
Specifically, while the Deputy Governor, Economic Policy, Dr. Sarah Alade, who has been in the position since March 26, 2007, is expected to step down next month, the tenure of the Deputy Governor, Operations, Alhaji Suleiman Barau would come to an end by the end of this year.
Both of them would have served two terms of five years each when their tenures expire.
Section 8 (1) of the CBN Act 2007 states that “the Governor and Deputy-Governors shall be persons of recognised financial experience and shall be appointed by the President subject to confirmation by the Senate on such terms and conditions as may be set out in their respective letters of appointment”. 
To this end, THISDAY learnt that politicians seeking the plum jobs for their cronies as well as economists and other financial market experts who feel they are qualified for the jobs are already lobbying officials in the presidency.
“There is intense lobbying for the CBN deputy governors’ jobs. Those seeking for these jobs are already putting their contacts in the presidency under pressure,” a source who pleaded to remain anonymous said.
The CBN Act is silent on whether a deputy governor can be appointed from within the central bank on the recommendation of the CBN governor.
But there have been instances where directors of the central bank have been elevated to the position of deputy governors.
There have also been instances where a CBN governor made the recommendations and were approved by the president.
For instance, prior to her appointment as deputy governor, Alade was Director, Banking Operations Department.
In that capacity, she served as Chairman Board of Directors, Nigeria Interbank Settlement System (NIBSS) and was the Secretary, National Payments System Committee (NPSC).
She is from Kwara State, and in line with the federal character principle, she would likely be replaced by someone from any of the states in the North-central geopolitical zone.
As deputy governor (Economic Policy), Alade superintends the Economic Policy Directorate comprising the Research, Monetary Policy, Trade and Exchange, Statistics Departments and Financial Markets Departments.
Also as the Chairperson of the Monetary Policy Implementation Committee (MPIC), she interfaces with operational departments and coordinates technical inputs for the Monetary Policy Committee (MPC).
Barau, who is expected to step down by December, is from Kaduna State and would also likely be replaced by someone from the North-west region of the country.
He superintends the Banking and System Payment Directorate, Branch Operations, Currency Operations, Information Technology and Reserve Management.