…Relief temporary –Economist, NECA
By Bimbo Oyesola and Isaac Anumihe
Nigerians have been celebrating the recent rebound of the naira against the dollar at the foreign exchange market following the Central Bank of Nigeria’s (CBN’s) injection of about $550.9 million to stabilise the soaring demand by end users.
In one of its major interventions in recent times, the apex bank pumped in about $370.9 million to the market through 23 deposit money banks to ease demand pressure by Nigerians for foreign exchange towards meeting various obligations under visible and invisible needs categories.
It, however, topped it up with another $180 million on Monday, with a view to firming the naira against the greenback. While $100 million was for the wholesale forwards segment, $80 million was for the settlement of dollar demand for school fees, medicals and Personal Travel Allowance (PTA), among others.
Since these injections, the naira has, in the last few days, firmed up against the dollar to close at between N460 per dollar and N480 per dollar from N520 per dollar early last week. But while many have hailed the apex bank’s latest intervention, there are fears in some quarters that CBN might not sustain the tempo and this might send a dangerous signal to the market.
Reacting to the outcome of the CBN intervention, Nigeria’s Organised Private Sector (OPS) yesterday, hailed the policy, saying that it will help the productive sector of the economy.
The Manufacturers Association of Nigeria (MAN), for instance, said that it is the best news that has come to the sector in years, in view of the hardship the high foreign exchange drought has brought upon its members in the past two years.
MAN President, Frank Jacobs, who spoke with Daily Sun in a telephone interview, said with the firming of the naira against the dollar, manufacturers would be able to import their raw materials cheaper.
“If we can get our raw materials cheaper, that means cost of production can come down, the prices of commodities would also come down and this would make our products competitive”, he said.
Jacobs also noted that it would make more companies that are already out of business due to problem of acquiring new machines, to get the machines at a cheaper cost.
“It is indeed best news for our sector. Our members now buy forex at N430 and it’s still going down, and this means cost of acquiring new machines will also go down, compared to when we sourced forex at N530.”he said.
The MAN President however said that the sustainability of the present process is the only thing that worries the manufacturers in spite of the assurance from the Central Bank of Nigeria (CBN).
But he maintained that if the current scenario persists, where the manufacturers get the forex cheap, then it would not be long for the nation to get out of the current economic mess.
Though the Nigeria Employers Consultative Association (NECA) commended the CBN for what it considered its recent winning formula, it however expressed some doubt about the ability of the apex bank to sustain it.
The Director General of NECA, Olusegun Oshinowo, said the present move was just an intervention, whereas the demand for forex in the overall national economy goes beyond meeting the Business Travelling Allowance (BTA), Personal Travelling Allowance (PTA), medical bill and school fees.
“Nigeria still imports petroleum products, which take the chunk of our forex and which cannot be sustainable in the parallel market. So, there is need for us to look beyond the short term and see if the CBN can meet the forex need of the economy,” he stated.
According to him, there is still dearth of forex in relation to providing adequate forex for the economy, hence the sustainability in the medium term beyond the present short term intervention is of concern to Nigerians.
”There is a big gap between forex need of the economy and what CBN can supply. What they’ve been able to do is to meet the demand in the short term, but the question is whether CBN can meet the forex demand of the economy in the medium term,” he said.
Meanwhile, a development economist, Mr. Odilim Enwegbara, has said that the apex bank’s measure may not be sustainable as the CBN does not have a steady hold on the dollar. According to him, the regulator is supposed to participate in the market and not to intervene.
He observed that CBN takes arbitrary measures because there is no board to check its policies. He called for the constitution of the board of the apex bank to oversee some of its activities with respect to the foreign exchange management.
The economy expert also cited a section of the CBN Act 2007 where the governor must appear before the National Assembly at least once a year to present his monetary policy.
“It is not necessary (to intervene) because when you intervene, you distort the market value of the currency. When you flood the market with dollar, what you are doing is that those who have been buying out the market – importers who have been having high rate –will no longer import and they will return to the market. That will increase the demand of the currency (dollar).
“CBN’s natural constituency is the banks. Normally they inform the banks that they will soon intervene. So, the banks will just wait and gather a lot of naira. As soon as they intervene they buy up the money. And of course, they are not buying the money for the real market, they are buying it for importers. These are the people that make serious payment to banks for helping them to get the dollar.”