CBN to increase list of banned imported items
• Insists On Regulated Forex Floatation
• Expert Says Multiple Exchange Rates
• Encourage Rent-Seeking, Round Tripping
Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele, has insisted on regulated foreign exchange regime to ensure that the naira does not go beyond a certain band in the exchange market.
Also, the Apex Bank said it has no intention of becoming reckless with the nation’s foreign reserves, which increased from $24b it was three months ago to $29.8b last week.
According to the bank, the foreign reserves would not be deployed for the importation of goods that cannot be sourced locally, pointing out that increase in foreign reserves shows that the economy is healthy.
On the agitation for floating the exchange rate, Emefiele described proponents as blackmailers, pointing out that floating the exchange rate carries with it the consequence of a further devaluation of the naira.
The CBN boss who spoke last week at the Monetary Policy Committee [MPC] meeting, said the bank would tighten the forex management knob or strategy by introducing more items to the list of banned goods, to deter their importation to the country, as a way of boosting local production, creating employment and growth, as well as, diversifying Nigeria’s sources of income.
Some stakeholders and experts have in recent times attacked the CBN for the scarcity of forex in the country, resulting in the high exchange margin between the naira and other frontline currencies like the Dollar, saying the monopoly of the apex bank in the exchange market was what was responsible for the disinterest shown by other players in the forex market.
One of the experts, a renowned Economist and avid critic of the CBN policies, Mr. Henry Boyo pointed out that the forex situation, particularly the Dollar/ Naira market will continue to degenerate until the CBN’s overbearing and monopolistic presence in the market is abrogated, pointing out that the apex bank alone supplies 80 per cent of the dollar needs in the market, hence it continues to distort and control the market, making it unattractive to other suppliers, with the attendant rent-seeking and round tripping clusters the development has created because of scarcity.
However the CBN in a sharp reaction at last Friday, defended its position claiming that the real reason some people were oppose to its forex policy was everything, but patriotic or nationalistic.
Its Acting Director of Communications, Mr. Isaac Okorafor in a statement said: “ Intelligence reports at the disposal of the Bank reveal the involvement of some unpatriotic elements funding the push to have the CBN and the Federal Government reverse its forex policy, which is aimed at conserving foreign exchange, stimulating agriculture and manufacturing, and also promoting exports.
“The present economic challenges that we face have been worsened by our past practice of frittering away huge earnings made from oil sales, over the years. As we have explained severally, our decisions on forex management are prompted by the challenge posed by the level of depletion of the country’s reserves, arising from issues such as a drastic reduction in oil earnings, speculative attacks and round tripping.”
But Boyo insisted that the panacea to a competitive forex market in Nigeria is for the withdrawal of CBN from the market.
His words: “ Once you remove the monopoly of the CBN on the foreign exchange market, you will get a much more harmonious exchange rate regime. The situation where Central Bank supplies over 80 percent of the total dollars or forex sold in the market must be a monopoly.
“Therefore, if CBN has a monopoly of the Dollar market, then it means the dollar-naira market must also be subject to abuses and distortions which are inevitable wherever you have monopoly. That is the reality. If you want to now ensure that the band between the official and the unofficial market rate are narrower in the market to reduce the distortions of monopoly, then of course what you have to do is to ensure there is some equity within the market.”