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CBN forex policy fuelling economic crisis – LCCI

By on July 28, 2015

The Lagos Chamber of Commerce and Industry has expressed worry over the widening gap in the foreign exchange rates between the parallel and the interbank markets, saying it is an incentive for round-tripping.

The naira currently exchanges for N244 per dollar at the parallel or black market, while the Central Bank of Nigeria pegs it at 197 per dollar at the interbank market.

In a reaction to the outcome the Monetary Policy Committee meeting last week in which the CBN Governor, Mr. Godwin Emefiele, said the naira was appropriately priced, the LCCI disagreed with that position.

It said in a statement signed by its President, Mr. Remi Bello, on Sunday that the current situation had profound and negative implications on the economy.

“It is an incentive for round- tripping, it will create distortions in the economy, it compromises the principle of level playing field in the economy, it will make the management of the foreign exchange market vulnerable to all manner of sharp practices and corruption,” it stated.

The chamber expressed dismay at the CBN’s unwillingness to review its list of 41 items banned from accessing foreign exchange at the official rate and demanded a publication of the list of the beneficiaries of the restrictive forex allocations in the past one month.

The LCCI called on the central bank to publish the list in the spirit of transparency and in line with the values of the present administration.

It noted that manufacturers had raised issues of classification of items for proper identification of the products and to make the implementation less disruptive to the economy.

It said, “There are many items on the list, which are critical inputs of many production firms. Sustainability of many manufacturing activities is currently at risk, especially with the apparent unwillingness of the CBN to shift ground.

“Meanwhile, in the spirit of transparency and in line with the values of the present administration, we call for the publication of the list of beneficiaries of the foreign exchange allocations in the past one month. This will allow for a more robust discussion and engagement on the way forward.”

The LCCI also said it expected the MPC to address the issue of importation of petroleum products, which it noted, was exerting the highest pressure on the foreign exchange market and the country’s reserves.

“The same is true of the implications of fuel subsidy on the fiscal stability of governments at all levels. These are major fiscal issues posing challenges for monetary policy and the management of the foreign exchange market. We call on President (Muhammadu) Buhari to do something urgently about these critical issues.”

Bello said the protracted problem of excess liquidity should be addressed in a manner that would not persistently cause disruption and dislocation to the economy.

According to him, the therapy of interminable monetary tightening has really not worked since the focus has been on tackling the symptoms and not the cause.

He said, “We submit that the phenomenon of excess liquidity is driven principally by the monetisation of crude oil receipts and the high and increasing banking system credit to the Federal Government.

“Fixing the problem through a root cause analysis will be more helpful to the economy. It is critical to curb the incidence of high powered money in the financial system.”

 

[Punch]