By: Damian Okonkwo
The Centre for the Promotion of Private Enterprise (CPPE) has advised the Central Bank of Nigeria (CBN) to reconsider its stance on the decision to terminate the sales of forex to the banks as proposed by the body to commence such by the end of 2022.
Godwin Emefiele, CBN governor, had said the apex bank will stop the sale of foreign exchange to banks by the end of the year.
In a statement issued last week Sunday, Muda Yusuf, CPPE chief executive officer, said there would be consequences if this decision is taken by the financial authority. It is not clear whether the CBN intends to revert to the BDC or create a new body to become the custodians of forex sales by end of the year.
“The implication of this is that the CBN will stop its supply of forex to the foreign exchange market,” the statement reads.
Hence, the spokesman of the association Yusuf has stated that: “CPPE would like to caution that the apex bank should rigorously think through this proposition before implementation because of the likely systemic shocks, business disruptions, macroeconomic dislocations and weakening of investors confidence.”
Further he asserted that “a much deeper and robust I &E forex window should be in place before the CBN can contemplate a termination of its forex market interventions.”
More so, notwithstanding the ban placed on BDC in handling the forex exchange in the country, the Association of Bureaux de Change Operators of Nigeria (ABCON) has asked the monetary authority (CBN) to de-risk their operations in order to receive diaspora remittances through the autonomous forex windows.
The Nigerian autonomous foreign exchange (NAFEX) is a market trading segment for investors, exporters and end-users that allows FX trades to be made at a market-determined rate.
In May 2021, the Central Bank of Nigeria (CBN) adopted NAFEX as the countrys official forex window.
Above all, Yusuf commended the effort of the apex bank on the RT200 programme as it would go a long way in affecting the economy tremendously if properly managed.
“The reality is that supply-side policies are even more critical and impactful than demand management interventions in the foreign exchange market. Over the last couple of years, the CBN has been fixated on managing the demand side of the foreign exchange market and the outcomes have been suboptimal,” Yusuf said.
He further highlighted the success factors that should be considered by the Bankers Committee, adding that for the initiative to succeed, there is a need to put certain things in place such as fixing structural constraints impeding non-oil exports, reviewing the pricing regime in the I&E window, giving exporters access to export proceeds, expanding the scope of forex supply strategies and allowing forex-generating MDAs to sell at the I&E window.
“Structural variables are not within the purview of the CBN or the Bankers Committee. The fiscal authorities have much bigger roles to play in fixing the structural constraints which have been impeding non-oil exports productivity and competitiveness for decades,” he added.
Collaboration with fiscal authorities is a critical success factor for the realisation of the RT 200 outcomes. It is impossible to clap with one hand. Complementarity between the fiscal and monetary authorities is therefore imperative for the success of this scheme.
Ipso facto, he suggests that the CBN should take urgent steps to ensure that the exchange rate regime in the I&E window is market reflective. The pricing regime should be flexible and reflect the demand and supply dynamics. This is the biggest incentive that the apex bank can give to the non-oil export sector. It will be more impactful than any rebate that the CBN could be contemplating.
Exporters in the economy must be allowed unfettered access to their exports proceeds. The current policy regime on export proceeds is stifling, restrictive and repressive. It is inhibiting export initiatives, enterprise and growth.
CBN should expand the scope of its new foreign exchange supply strategies and incentives to cover other sources of foreign exchange inflows into the economy. Inflows from these sources should be completely liberalised through a market-driven I&E window. Current regulatory regime for inflows is obstructive and inhibiting.
Analysts believe that we might experience a greater devaluation of naira by end of 2022 if the CBN should carry on with such policy except an alternative measure is provided by carrying on with such decisions.
