The Central Bank of Nigeria (CBN) has again changed its rules on foreign exchange (FOREX) allocations for manufacturers and travellers in a bid to ease scarcity and ensure enough liquidity.
In the new rules released yesterday, the bank is providing, with immediate effect, direct additional funding to banks to meet the needs of Nigerians for Personal and Business Travel, Medical needs, and school fees.
The CBN expects such retail transactions to be settled at a rate not exceeding 20 percent above the interbank market rate (nearly 366/$1).
The new policy also stopped prioritising manufacturing above other sectors in the allocation or utilisation of the forex.
It added that even though the manufacturing sector would remain the CBN’s strong priority, it will no longer impose allocation/utilisation rules on commercial banks.
Previously, the CBN had directed banks to be allocating 60 percent of the forex to the manufacturing sector, the process that starves other sectors of the needed forex. Nigerian economy has been hit by the scarcity of forex due to the fall in price of crude oil in the international market, leaving virtually all the sectors of the economy contracted in the last two quarters of 2016.
Industries like electricity, pharmaceutical, property, automobile, printing and services that mostly rely on the imported raw materials have suffered heavy consequences, as their operation cost overshot by about 200 percent in some instances.
At the parallel market yesterday the naira fell to 515/$1 even as traders are uncertain about the effectiveness of the new policy.
Shehu Aliyu, a trader in Abuja, said the new rule if implemented would slow down the rate of naira depreciation.
He, however, expressed doubt about its implementation saying that they had witnessed many of such policies in the past by the apex bank, which had been frustrated by the same people in the banking sector.
The Executive Secretary of the National Association of Small and Medium Entrepreneurs (NASMEs), Eke Ubiji, told the Daily Trust that the new policy in the eyes of manufacturers is like “moving from frying pan to fire.”
Ubiji said the policy will “kill” the manufacturing sector and reverse gains achieved since the 60 per cent forex allocation to manufacturers was introduced.
He said those criticising the proportion of forex allocated to manufacturers should consider what necessitated the policy in the first place, which was the importation of machinery for manufacturing purposes.
“Most manufacturers import their machineries from abroad,” Ubuji said. “They need foreign exchange to import. That was why the policy was put in place,” he said.
He said the reversal of the policy will not only hurt manufacturers but would also have adverse effect on the economy and Nigerians in general.
At the 14th Daily Trust Dialogue held recently in Abuja, the Chairman of Stanbic IBTC Bank Plc, Mr. Atedo Peterside, tackled the CBN for its “failed” policies on foreign exchange.
Peterside said the disparity in the proportions of forex access allowed by the apex bank for manufacturers and other operators in other sectors of the economy was partly responsibility for forex crisis in the economy.
“The directive to banks to allocate 60 per cent of forex to manufacturers that account for only 10 per cent of the Gross Domestic Product has exacerbated an already bad supply situation. 40 per cent is too small to accommodate the rest of the economy and so all other sectors have been crippled, including the service sector, which accounts for over 50 per cent of the GDP,” the bank executive had said.
“In order to further increase the availability of foreign exchange to all end-users, the CBN has decided to significantly reduce the tenor of its forward sales from the current maximum cycle of 180 days, to no more than 60 days from the date of transaction,” the CBN said.
“In order to further ease the burden of travelers and ensure that transactions are settled at much more competitive exchange rates, the CBN hereby directs all banks to open FX retail outlets at major airports as soon as logistics permit,” it added.
Culled from Business News