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Forex scarcity persists as CBN’s Naira4Dollar policy closes

By on May 3, 2021 0

BY BUKOLA IDOWU, Lagos

As the two-month period of the Central Bank of Nigeria’s (CBN) Naira4Dollar initiative is almost over, analysts and stakeholders in the Nigerian economy say there has not been much improvement. liquidity in foreign currency in the country.

The CBN had introduced in March this year the pilot program of the Naira4Dollar initiative which gives recipients of remittances in the country an incentive of N5 for every dollar to encourage remittances through official channels and increase foreign currency liquidity in the country.

From March 8, 2021, when the policy started until May 8, 2021, all recipients of diaspora remittances through CBN licensed international money transfer operators have been paid. N5 for every dollar they receive in cash inflows.

CBN Governor Godwin Emefiele, who said he was confident the campaign would yield positive results, said the measure would encourage banks and financial institutions to develop investment products and vehicles to attract investment Nigerians in the diaspora.

“We are convinced that these changes can help finance a future flow of investment opportunities for Nigerians living abroad,” he said.

As the policy comes to an end on Saturday, May 8, 2021, analysts, while applauding the initiative, however say that it has not had any real impact on the level of liquidity of currencies, which, according to them, continues to be rare. This also takes into account the fact that remittances are likely to decline as the savings the remittances come from are also recovering from the COVID-19 pandemic.

Lagos Chamber of Commerce and Industry chief executive Muda Yusuf said the foreign exchange liquidity position had not improved. “The exchange rate is still high at N480, N485 and some still buy at N500 and it affects business, capacity utilization and production causing scarcity and price hikes. This is one of the reasons why inflation is increasing in the country.

“There is still a scarcity of forex. The situation has not changed; if anything, it got worse. Sending CBN Naira4Dollar funds is a good way to encourage inflows, but if they broaden the scope to cover all other sources of inflows, it will allow more inflows into the country. What is needed is allowing people to sell at any rate rather than telling them what rate to sell. This will further improve liquidity.

“Exporters complain that the rate they get is not the market rate and a lot of them are reluctant to bring in revenue. That will change if they don’t impose tariffs. It is necessary to ease the rigidity of the fixed rate in the foreign exchange market. If they relax, liquidity will be improved.

“The other thing is that we are spending way too much than what we earn on imports, especially on importing oil. With oil above $ 60 to $ 70 a barrel, the system should have started to improve, but a lot of what we earn comes from importing petroleum products. So the economy is not what it should be. We need to fix the oil sector, get the oil sector deregulated so that the burden of the NNPC is removed.

“If this is done, it will ease forex liquidity and further strengthen the economy. We must also encourage foreign direct investors (FDI), foreign portfolio investors (REITs) and exporters by liberalizing the foreign exchange market and removing all bottlenecks, including prices. “

For his part, the Managing Director and CEO of Cowry Assets Management Ltd, Johnson Chukwu, said that while there are no official figures on the amount that was remitted during the period, “ before you can receive remittances, you need to look at what’s going on there.

“Most of the western countries are going through hard times, so Nigerians in those countries may not have a surplus to send home as these countries come out of recession and COVID-induced lockdown.”

However, Chukwu was particularly keen on encouraging exports as a means of improving foreign exchange inflows into the country. For him, to encourage exports, the country must have exportable products.

“We don’t have a lot of exportable products because our productivity is low, our added value is low. Our production cost is high because the cost of doing business is high in the country.

“For this reason, when we produce something in terms of intermediate or final goods, they cannot compete with products produced elsewhere. This is the main constraint to exporting. We need to create an environment that will allow us to easily produce a large number of exportable products in the country. “

This is also the opinion of development economist Tayo Bello, who says the country does not export enough products that could earn it the necessary foreign exchange.
“How much do we export to this country?” he asked.

Speaking further, he said: “We used to have sesame seeds, rubber, but they are no longer available. Tell me what are we exporting today? Most of the currencies we have in the parallel market are the proceeds of illegal transactions from drug trafficking etc. NNPC obtains the forex by selling crude.

“There is so much pressure on naira. It will continue to be so because Nigeria’s economy depends on imports; we import everything. Nigeria still imports toothpicks; even our petroleum products are imported. We don’t have exportable products because all the factories have closed. We had cocoa, palm oil, cotton, yam hides and skins and tubers, among others, but today the farmers cannot go to the farm, so we will continue to be unstable with it all.

Bello added that without CBN’s intervention, the exchange rate would have risen to N1,000 to the dollar.

He postulated, however, that the Naira4Dollar policy is one that should have been implemented before now, because, according to him, banks and IMTOs (International Money Transfer Operators) have tricked customers into giving them local currencies instead of foreign currency when transferring funds.