Stories by Blaise Udunze
THE Central Bank of Nigeria (CBN) has disclosed it may conduct liquidity mop-up exercise after the 2016 budget is passed to stabilise the domestic currency, and facilitate the growth of the external sector.
Deputy Director of Financial System Surveillance, Okechukwu Nnanna, who disclosed this at the weekend, said the move was the CBN’s likely course of action to stabilise the external sector.
This was as a financial services firm, Afrinvest, argued that despite the move by government to borrow from multilateral sources up to N900.0billion to partially fund the N2.2trillion deficit, it would still require some adjustments to domestic macroeconomic policies to align with external sector realties.
According to the investment research firm, this may not be enough to stimulate foreign capital flows and improve the capital account if current account is not stabilised by both short term flexibility in exchange rate management and medium term efforts to boost real sector productivity.
It explained that the fundamentals of Nigeria’s external sector balance haven’t changed much with foreign exchange (fx) inflows unable to match domestic demand, while currency restrictions subsists in the interbank market.
“Cash backed interbank intervention by the CBN fell to a year low of US$972.7billion in January while monthly foreign currency inflows into the system fell to a 7-year (on a Y-o-Y basis) of US$6.6billion in December 2015, highlighting the FX shortages in the economy,” stated.
It further hinted, “We view the appreciation of the naira at the unregulated segments of the market as momentary and speculative pressures may resume if the status-quo on exchange rate non-adjustments and FX restrictions are maintained.”
Meanwhile, the CBN called for diversification of sources of foreign exchange inflow into the country. An authoritative source at the apex bank in Lagos on Sunday that scarcity of the dollar was responsible for its current slide at the black market.
He said that the CBN had not devalued the naira, but scarcity of foreign currencies was responsible for the depreciation of the naira at the parallel market.
According to the source, the CBN has always advocated for diversification of sources of foreign exchange into the country rather than depending solely on sale of crude oil. He said that the apex bank had taken several initiatives to shore up the value of the naira by increasing productivity in the country. The source said that the CBN realised that restricting accessing to foreign exchange for the importation of food items would not automatically translate to their local production.
New FX policy: Manufacturers seek support for backward integration policy
… As Ogun pledges support
THE Managing Director of Sonia Food Industries, Mr. Nnamdi Nnodebe, has urged the Federal Government to grant indigenous manufacturers a window of 18 months during which they can backwardly integrate.
Nnodebe made the call recently, during a factory tour by the Ogun State Commissioner for Commerce and Industry, Mr. Bimbo Ashiru, of some manufacturing firms in the state.
According to Nnodebe, this development has become a challenge that has left manufacturers groaning under the weight of the foreign exchange policy which has made it difficult for them to access raw materials.
He said “I am very confident that if given this allowance, it will work together for our good and for the economy, because Sonia Foods can complete a tomato factory
farm, required for processing tomato concentrate, within 2 years.
He was however optimistic about the prospects, even as he also prevailed on the Federal Government to allow manufacturers more time to achieve the backward integration objectives.
Also speaking, Manufacturers Association of Nigeria (MAN), President, Dr. Frank Jacobs, echoed the words of Nnodebe when he said, “18 months window is what manufacturers of Tomato need to move the sector forward. Backward integration is paramount to tomato producers, and it would only be ideal to support them, actualise this ambition for the good of our economy, as you well know once this is actualised, jobs would be created and more importantly exports would start to happen because Nigeria has the potential to become
leading exporter of concentrates, if given the prerequisite support”.
“One way, we could make this happen, is to partner the Northern states, since tomato cultivation thrives in the North where it finds favourable climate Governors in the North should endeavour to work together with credible manufacturers like Sonia Foods, to speedily achieve backward integration. Nigeria is the second highest Producer of tomato in Africa and 13th in the world. But despite this, it spends N11.7billion naira a year, on importation of tomato paste”. “Sadly, about 750,000 of the tomatoes harvested in Nigeria, go to waste, as a result of poor Food Supply Chain (FSC) management; price instability, and the supply preference of farmers and middlemen for urban markets than processors due to low farm gate prices”.