Accolades, knocks greet new forex policy
Commendation and knocks have continued to greet the recent new foreign exchange (forex) policy rules introduced by the Central Bank of Nigeria (CBN) as part of measures to streamline the market and ensure pressure is taken off the Naira.
While some experts have commended the apex bank for what they described as a ‘bold step’ capable of addressing the forex crisis in the country, others reasoned otherwise, suggesting that the new rule would rather create opportunity for the banks and some individuals to enrich themselves through round-tripping at the expense of the country’s foreign reserves, which has just resumed growth after a long period of decline.
As a fall-out of last Monday’s CBN announcement of the new policy, the naira has regained value, particularly at the parallel market gaining about 25 kobo against the United States dollar as the exchange rate of the two currencies fell from N520/$1 the previous week to a new level of N455/$1 at the segment of the market as at yesterday. However, the inter-bank exchange rate remained same at N305/$1 throughout the period.
However, economists and major stakeholders in the forex market have reacted to the new policy differently, with all of them agreeing a sustainable solution that can address the crisis on a permanent basis.
Former Chief Executive Officer of Unity Bank Plc, Alhaji Rislanudeen Mohammed, believes the action by the apex bank at the time was timely and a bold one.
However, he raised fears about the sustainability of the action and would rather want a permanent solution to the challenge, which he identified as forex supply, hence he called for a permanent solution to the Niger Delta vandalism issue and more importantly the devaluation of the naira further to attain the real market value of the currency in the forex market. He argued that this would become attractive to portfolio investors and others who will now throng the Nigerian market because of the high interest incentive.
Another expert who also commended the new CBN policy is the Chief Executive Officer, Cowry Assets Management Limited, Mr. Johnson Chukwu, who said though the policy will close the gap between the interbank and parallel market, but was all the same not new as people would think.
An Economist, Dr. Boniface Chizea, while assessing the impact of the policy said: “ We also plead for sustainability. The promised weekly allocation of one million dollars to the 21 banks, which should amount on aggregate to around one billion dollars a year, and considering the evolving stability at the oil market with the price consistently in mid-50 dollars a barrel, there is no reason why we should not have sustainability. And once that is the case what has just happened promises to be a game changer.”
Professor of Economics at the Olabisi Onabanjo University, Sheriffdeen Tella, opposed the policy action, saying it would drain the country’s external reserves and worsen the exchange rate challenges facing the country.”