Since Central Bank of Nigeria (CBN) floated the Naira four months ago, June 20, 2016 to be precise, the foreign exchange market has continued to plummet and economy situation worsens.
CBN had launched the new foreign exchange regime with high expectation from both local and foreign investors, manufacturers and financial analysts.
The move by CBN was to consistently push out several foreign exchange policies, to attract foreign exchange inflows into the country, boost liquidity and promotes diversification of the economy.
But many have continually expressed disappointment, claiming that it has not benefited common man on the street with high price of goods since Nigerian is highly dependent on foreign goods some foreign exchange restrictions to Nigerians in Diasporas.
Liquidity condition particularly worsened following banks inability to access their balances with the regulator as the technical glitch with the apex bank’s system – which started last month – remains unresolved.
As at last week, Naira, at the parallel market, had appreciated by 3.19 per cent (Week-on-week) w/w, 2.63per cent w/w and 0.98 per cent w/w against the Dollar, Pound and Euro respectively to trade at N455.00, N555.00 and N505.00.
At the interbank market, the Naira strengthened by 7.34 per cent w/w and 2.25per cent w/w against the Dollar and Euro to exchange at N304.75 and N343.55 respectively, while it depreciated against the Pound by 0.72per cent at N400.77.
The inflation rate has risen since June (16.2 per cent) to 17.7 per cent in September and it is expected to increase further in October to 18.17 per cent
The National Bureau of Statistics (NBS) released its Capital Importation report for the third quarter of 2016, wherein it revealed that the total value of capital imported into the country in third quarter of 2016 was $1.82 billion, representing 74.84 per cent q/q increase and 33.70 per cent y/y decline.
Noteworthy, the highest level of capital imported during the review period was recorded in August when $894.00 million was imported – the highest level since third quarter of 2015.
Financial analysts had received the CBN news with open arms, due to its potential to help grow the economy and restore investors’ confidence.
At presently, financial experts believed that since the liberalization of the official interbank foreign market, much have not yet been seen in the value of the Naira, as well as the current foreign inflow is yet to reflect on prices of goods.
In order to beef up the fast depleting external reserves, the central bank had stopped the sales of foreign exchange to importers of rice, private jets, textiles, tomato paste, poultry products and 35 other times.
The CBN, in a circular dated June 23, 2015, stated that the implementation of the policy would help to conserve foreign reserves and facilitate the resuscitation of domestic industries as well as generate employment.
The circular, which was signed by the Director, Trade and Exchange, CBN, Mr. Olakanmi Gbadamosi, stated that it was imperative to exclude importers of some goods and services from accessing foreign exchange at the Nigerian foreign exchange market in order to encourage local production of the items.
Meanwhile, section of manufacturers are still struggling to fathom why 41 items earlier excluded from CBN’s official forex window, should remain excluded even from the interbank forex market under the new system.
They argued that since the new foreign exchange policy is a way of closing the door for buying dollars at the CBN official rate where 41 items had earlier been excluded, now that the exchange rate would be determined by demand and supply (market forces), the apex bank has no reason to still dictate items that will be included or excluded from the market
In a separate reaction on phone to our correspondent, financial experts reiterated that new flexible foreign exchange regime; in the real sense will drive alternative inflows into the country and in the long run boost the Nigerian economy.
According to Managing Director/CEO, Highcap Securities Ltd, Mr. David Adonri , the policy is the most important measure that has taken in this country since independence, it is the most important economic policy.
He said, “At every point in time, the business people who need foreign exchange would have access to it, adding that market prices may be up the depending on the supply and demand. But at any point in time anybody who needs forex to do business will have access to it and when business people have access to foreign exchange it means that they will run their operations steadily.”
Adonrin noted that if the proper market is developed, the supply of hard currency to that market will not be fully dependent on what Nigeria earns from crude oil, there forex traders all over the world, that will be interested and even people within will also be interested in bringing in supply off dollars or hard currency into that market.
Also, the Managing Director/CEO, Cowry Asset Management Limited, Mr. Johnson Chukwu, said, “We have always been agitating for it, so that we should allow the naira to reflect the strength of the economy, because in no time it would begin to attract investment to the country.”
According to him, it is best for the economy that we have flexible exchange rate such that will encourage alternative inflows from other sources rather than the sale process from crude.