By Ayo Fadimu
The Lagos Chamber of Commerce and industry [LCCI] has called for normality in Nigerian foreign exchange market noting that a forex market characterized by transparency, liquidity and stability is imperative for rebuilding the economic growth momentum, boosting investors’ confidence, encouraging foreign exchange inflows and creating jobs.
The Chambers in a press release signed by its Director General, Muda Yusuf noted that the pressure on foreign reserves has intensified as crude oil prices continue to plunge which brings resultant impact on the naira exchange rate with varying degrees of impact on all sectors of the economy.
According the to the Chambers, “the macroeconomic outlook is a cause for concern. However, the quality of monetary and fiscal policy responses could have a considerable moderating effect on the impact of this negative outlook on the economy, the investors and the citizens”.
The statement read further “as the Monetary Policy Committee [MPC] of the CBN meets this week, it important to draw attention to key areas of concern. The apex bank needs to urgently articulate a comprehensive framework for the autonomous market [which is now the major forex market]. The scope of the market needs to be clearly defined”
The Chambers also suggested that the foreign exchange from sources such as diaspora remittances, export proceeds, forex sales by foreign investors and multinational companies as well as forex sales by donor agencies and other NGOs should be allowed to be freely traded in the autonomous market:
in order to ensure a deep forex market.
LCCI also warned against excessive regulation and documentation as it could undermine the development of a robust autonomous forex market while current controls and regulations offorex inflows into the economy should be relaxed, without necessarily compromising the money laundering preventive measures of the relevant authorities. Overregulation considerably hurts the economy. It is paramount at this time to articulate policies that would stimulate and unlock the huge potential in diaspora remittances and other capital inflows into the economy. Diaspora remittances to Nigeria were $21 billion in 2014, according to World Bank sources.
The Chambers also reiterated its call to the CBN to lift foreign exchange restrictions on the 41 items, especially now that the CBN official forex window has been closed. According to the release, the restrictions have caused considerable loss of jobs and many more jobs are at risk as many firms run out of stock of their critical input for production. For the sake of economic policy coherence, any product that is not on the official import prohibition list of the federal government should have access to the autonomous foreign exchange market.
“Import prohibition is a vital trade policy matter which should be undertaken in an integrated manner with inputs from the Finance Ministry, National Planning, Trade and Investment and the Nigeria Customs service. The consequences of import prohibition are far reaching and go beyond the narrow perspective of conservation of foreign exchange. The dimensions of inter sectoral linkages, employment implications, customs revenue implications, breaches of regional and other international trade treaties should be taken into account.Fiscal policy measures [taxation and import tariffs] could be used, when necessary, to shape the behaviour of economic operators as the policy thrust of government dictates. The normality in the foreign exchange market is very crucial at this time to stem the current slide in the economy, factory closures, job losses, escalating prices, waning GDP growth and weakening investors’ confidence. The impact is being felt across all levels of investments – large companies, medium enterprises, small business, micro enterprises and the informal sector. The systemic significance of foreign exchange policy in the Nigerian economy needs to be well appreciated. This is partly as a result of the high import dependence of the economy, and also a reflection of the increasing integration of the Nigerian economy into the global economy. It is very important to get it right” the statement read.