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Provide N200bn loan to investors – LCCI urges CBN

By on February 24, 2015

The Lagos Chamber of Commerce and Industry says the closure of the foreign exchange window, the Retail and Wholesale Dutch Auction systems, by the Central Bank of Nigeria will compound the challenges facing the real sector.

It has, therefore, urged the CBN to provide a refinancing facility of N200bn for investors with high forex exposure.

The CBN had last week Wednesday said all demands for foreign exchange should be channelled to the interbank market in a bid to stem round tripping, speculative demand, rent-seeking, spurious demand and inefficient use of scarce forex resources.

Although the LCCI noted that it might be difficult to fault the decision of the CBN, it stressed the need for mitigating measures to cushion the effects of the policy on investors with high forex exposure and ensure the continued survival of the real sector.

The group, in a statement on Sunday, said real sector operators, particularly the few that had access to the forex window, were the first victims of the closure of the RDAS.

It noted that the forex window was aimed at providing support for the real sector of the economy because of its strategic importance to the development process, job creation and inclusive growth.

The President, LCCI, Alhaji Remi Bello, was quoted in the statement as saying, “The CBN should urgently provide a refinancing facility as a lifeline for investors in the economy, who have high foreign exchange exposure. The sustainability of this class of businesses is currently at risk, he said.

“We recommend a minimum refinancing facility of N200bn to be provided at single-digit interest rate and five-year tenor,” Bello said.

On the immediate implication of the closure of the RDAS, the LCCI boss said, “It will result in the escalation of production cost for firms that had access to this forex window. Such firms will experience cost increases of up to 20 per cent. This will impact on sales performance, profit margins and ultimately capacity utilisation of their firms.

“Import duty and other port charges, which are computed as a percentage of import costs, will also correspondingly increase. This implies additional pressure on operating costs for erstwhile beneficiaries of the CBN RDAS forex window.”

According to the group, firms, funding requirements in naira will increase to reflect the new exchange rate and this has implications for the cost of funds.

“Many firms, especially manufacturers with high foreign exchange exposure, have been thrown into loss positions as a consequence of the depreciation of the naira over the last couple of months and the eventual closure of the RDAS window. This is a major challenge currently being faced by many real sector operators, especially the medium and large firms,” the LCCI stated.

As part of the mitigating measures, the chamber proposed that all critical raw materials and other imported inputs of manufacturing firms should now attract a zero import duty.

 

 

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