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Analysis: Lessons Nigeria's CBN and Ghana's BOG Should Learn from US Dollars Allocations.

It's frankly baffling to come to the realization that even seasoned monetary policy practitioners can think like laypeople:

Recently the Bank of Ghana and the Central Bank of Nigeria have been desperately attempting to strengthen their respective local currency through pumping US Dollars into the money market. The issue is, who stands to lose here?

Whether you like it or not, forex traders will not cease to buy up US Dollars in a speculative move to sell much higher when the Naira or the Cedi depreciate. Speculators will be speculators. Currency traders will be currency traders. Forex traders will be forex traders! The various rounds of BOG and CBN's US Dollars supply or allocation to forex bureau operators profit speculators in the long run. US Dollars hoarding and speculation thrive on central bank currency market intervention.

Foreign investors can only be too happy to welcome BOG and CBN's currency market intervention to easily repatriate funds back to their countries in US Dollars.

Foreign shareholders easily receive their dividends under such circumstances as the US Dollar has been made available.

Manufacturers don't have anything to complain to God about as long as the Central bank can keep it up.

Importers salute the US Dollars injection ; it is very much appreciated.

The thing is, do the BOG and the CBN have any sustainable sources of foreign exchange reserves? No, they don't!!

Nigeria has been making less and less money, I mean, fewer and fewer foreign currencies from its oil sales of late. Foreign Direct Investments into the country have also been on the lower side.

Ghana's national wealth is said to be in intensive care unit right this minute.

Then, why have the BOG and the CBN been monkeying around with precious hard earned hard currency like the almighty US Dollars?

The BOG and the CBN have got to be extra careful in their monetary, credit, and foreign exchange policies, other than that they will end up shooting themselves in the foot.

At times I wonder whether it is better to get rid of floating rate for the fixed rate or simply throw both the Cedi and the Naira away for a common currency knowing that Ghana and Nigeria have been plagued with financial and economic "headaches " over the years! A single currency in a monetary zone may help us all.

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BOG CBN Central Bank of Nigeria Ghana US Dollars

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