Dollar: Former statistician-general Yale faults CBN’s demand control moves

Former Nigerian statistician-general Yemi Kale has faulted the Central Bank of Nigeria’s (CBN) approach to stabilizing the naira by moderating dollar demand.

Mr Kale said it was more important to focus on boosting supply rather than attempting to control demand, warning that forcefully controlling demand could widen the foreign exchange (FX) gap and undermine confidence in the economy.

– Forex boost

Mr Kale’s remarks come amid Governor Olayemi Cardoso’s announcement that Nigeria’s foreign-exchange market has seen over $1 billion in inflows in the past two weeks, signalling improved market confidence following the CBN’s efforts to steady the currency.

Mr Cardoso highlighted measures implemented by the Abuja-based bank aimed at boosting market liquidity, pricing, and investor confidence. These measures included changing the method for setting the foreign-exchange rate, removing caps on transaction rates for international money transfers, and raising interest rates on short-term debt obligations.

The former statistician-general, who is now an economist at KPMG Nigeria, cautioned against forcefully controlling demand, arguing that such actions could lead to an increase in prices and worsen confidence in the economy.

“No please! Let’s Concentrate on boosting supply not controlling demand. We can’t really control demand in the near term without once again widening the fx gap and worsening confidence. Anytime we try to forcefully control anything it often leads to an increase in its price,” he wrote on X, formerly Twitter.

He later clarified that the post did not mean the central bank was not working on boosting supply.

“Please let me be clearer. My saying MORE ATTENTION should be placed on increasing supply & not “controlling”  demand does not suggest work is not ongoing in improving supply. Interview suggests CBN already on this. Data actually suggests supply has increased,” he said.

“Doesn’t also mean illegal or unproductive demand shouldn’t be tackled. Point here is that more attention to supply (which is better long term) as a strategy is preferred to demand management & doesn’t mean this isn’t already been done.”

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The CBN’s foreign-currency reforms, initiated in June to attract investors, have seen mixed results. Despite efforts to stabilize the naira, the currency slumped by about 50% last year, with a scarcity of dollar supply exacerbating volatility and widening the spread with the parallel market rate.

According to data from Lagos-based FMDQ, the naira has traded within a range of 1,348 to 1,479 per dollar since January 29, narrowing the gap with the parallel market rate to 2.3% from about 30% in January.