The Centre for the Promotion of Private Enterprises (CPPE), an economic and business advocacy think tank, has cautioned the Central Bank of Nigeria (CBN) on the cessation of the sales of foreign exchange (forex) to banks.
The CBN had said that it would cease feeding commercial banks with hefty forex before the end of the year 2022, urging it to source forex itself to operate.
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According to the Chief Executive Officer (CEO) of CPPE, Dr Muda Yusuf, the implication of this is that the apex bank will stop its supply of forex to the forex market.
He, therefore, cautioned the apex bank to rigorously think through the proposition before implementation, considering the likely systemic shocks, business disruptions, macroeconomic dislocations and weakening of investors’ confidence.
Yusuf suggested that a much deeper and robust Importers and Exporters (I&E) forex window should be in place before the CBN could contemplate termination of its forex market interventions.
He said CPPE welcomed the latest initiative of the Bankers Committee and the CBN to strengthen and deepen the supply side of the forex market.
The Bankers Committee had unveiled the “Race To $200bn in FX Repatriation (RT200 FX), an initiative that aggregates a set of policies, plans and projects for non-oil exports that seek to attract $200bn inflow exclusively from non-oil exports over the next three to five years.
While the centre described the initiative as ambitious but laudable; it commended the five key anchors of the policy: Value Adding Export Facility; Non-Oil Commodity Expansion Facility; Non-Oil Export Rebate Scheme; Non-Oil Export Terminal Financing and Bi-Annual Non-Oil Export Summit.
Yusuf said, “We commend the new focus of the CBN on supply-side strategy. 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.”
He, however, drew the attention of the Bankers Committee and the CBN to critical success factors for the RT200 initiative.
The economist pointed out that structural issues were very vital for driving the growth and competitiveness of non-oil exports. Though he made known that structural variables are not within the purview of the CBN or the Bankers Committee; he said the fiscal authorities had much bigger roles to play in fixing the structural constraints which had been impeding non-oil exports productivity and competitiveness for decades.
He, therefore, stressed that collaboration with fiscal authorities was a critical success factor for the realisation of the RT200.
Also, he pointed out that the current pricing regime in the Importers and Exporters (I&E) window of the foreign exchange market, which is at variance with the objectives of the RT200, would be a major impediment as the pricing regime inherently penalised exporters and served as a major demotivating factor to investment in the non-oil export sector.
He further urged the CBN to take urgent steps to ensure that the exchange rate regime in the I&E window was market-reflective; saying, it was the biggest incentive that the apex bank could give to the non-oil export sector.
He added that, “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. Exporters must be able to sell their proceeds at a mutually agreed exchange rate to either the banks, importers or the BDCs as the case may be. The apex bank should institute a willing buyer-willing seller framework for export proceeds.”