Will new CBN forex policy arrest naira’s slide?

If it is within the context of community and social development projects, it has little or no impact on our projects.  Our foreign currency, which is in United State dollars, comes from the Central Bank of Nigeria. It is converted at official exchange rate and we carry out our projects with the local currency which is the naira. Generally speaking, within the Nigerian context, I think it is a bold move that should douse the current tension within the system.

The slump of naira in recent times is a major cause for concern, which led the central bank and the National Economic Council into deciding to take this measure. I think it is a commendable one.

The most important thing is to be consistent so that confidence is restored to the capacity of the CBN to manage issues in the economy. There must be consistency in the supply of dollars and strict monitoring of its use.

On whether it has substantial impact on the economy, the issue is that they have started. With improvements in our foreign reserve and fiscal management, things can change with time. One may ask whether the measures on BTA and health will  have substantial impact  and bring the desired change in terms of improving the forex liquidity, boosting naira value and economic activities.

For policy makers, positive comments can only encourage them and enhance their efforts. But it is not very substantial in that context because of the demand for raw materials and importation of certain spare parts that will boost industrial activities; however, it is a good start. It shows that there is a response from the CBN. I think between now and the middle or end of the year, things should improve.

To make the naira appreciate, we need to control our consumption pattern. We need to look more inward. We need to review our agreement with the World Trade Organisation. It is the excessive demand for foreign goods that is putting pressure on the forex. So, we need to improve our consumption of local products and stimulate the capacity of indigenous industries.   • Dr Abdulkareem Obaje (National Coordinator, Federal Programme Support Unit, Community and Social Development Project, World Bank Assisted Project)

The economic team ought to act based on their experience. They ought to look at the situation we found ourselves in the past, when we were faced with such challenges. What method did we adopt then? On the basis of this and to the best of my knowledge, the issue of this new CBN directive may not address the free fall of the Naira against the dollar. I doubt it.

 The predictions of some experts in the field have all come to pass because when the exchange rate was around N300 to one dollar, they predicted that it would further fall to N500  to one dollar and now it is well below that and it is still falling. But we pray they get it right.

 The economic team once again has a lot to do and if they don’t understand the policies they should inject new blood into the system – those who have better understanding of the economy and can suggest ways by which we can get out of the mess. They should get Nigerians who can do it from anywhere. This is urgent.

 We also need to stimulate manufacturing of products here to reduce our dependence on foreign goods. This will also help to boost the value of the naira.

However, we need to address the issue of power before we can be thinking of any growth in this area because that is the major problem. Most of the investors are now pulling out of the country due to this. Power, coupled with other government policies remains key to survival of industries in the country and if they are got wrong, we would still continue to languish in this situation.   • Alhaji Waheed Oyeleke (Deputy Rector, Osun State Polytechnic, Iree)

The recent measure by the CBN with respect to forex management is chiefly aimed at narrowing the wide gap between the official and parallel market rates, as well as improving access to forex for Personal Travel Allowance and payment of school fees abroad.

I am sure that the CBN is under no illusion that the tiered exchange rates which this forex policy has brought about; will halt the slide in the value of the naira.

While admitting that a complete currency float is capable of unifying rates and reducing round tripping and speculative activities, toeing such a part will be suicidal for an import-dependent economy that depends on a single commodity for most of its forex inflows.

To reverse the current downward trend in the value of the naira, well coordinated fiscal policies should be deployed to pursue import substitution and enhance the competitiveness of local production with a view to curtailing forex demand.

On the supply side, the government should fast-track efforts to improve the ease of doing business and the state of infrastructure in order to attract foreign investments as well as develop multiple streams of earning foreign exchange.

 In my view, it is only when the supply of forex is guaranteed from diversified sources that the issue of market-determined value of the naira can be tabled for consideration.   •Uche Uwaleke (Associate Professor of Finance and Head, Banking and Finance Department, Nasarawa State University)

To my mind, the CBN has found it difficult to be independent. There are external forces within this administration that appear to be dictating to it. How do you explain a situation where certain individuals, because of their proximity to power, get dollars at the official rate and go behind and sell at the black market? His  Royal Highness, the Emir of Kano, Mohammed Sanusi II, spoke about this issue not long ago  has it been addressed? The new policy of allocating dollars to a privileged few cannot be a long term solution. We must ask ourselves, apart from oil, what are the other things we are producing for export?

Unless we are able to answer this question, we will continue to chase dollars to import  toothpicks, orange juice and pencils. Where is the power, where are the factories which will produce goods for export? How many Nigerians can afford to send their children to schools abroad?  Let us be realistic unless we address the basic problem which puts pressure on our foreign reserves, this piece meal approach will just not solve this problem. I will also give this government unsolicited advice, they should get professionals to manage our economy. This has nothing to do with politics because whether or not you belong to a political party we are all feeling the effects of the bad management of this economy. No matter what anybody says, the exchange rate of the naira to the dollar and all other foreign currencies has never been this bad.   •Abdullahi Jalo (Public affairs analyst)

As long as you have multiple exchange rates, the problem of shortage of forex will continue. As long as we have separate rates for people going to school, medical tourism and manufacturers, corruption will persist.  I don’t see the new measures addressing the fundamental problems of the volatility of the naira.

There is little confidence in the fiscal and monitory policies of this administration, there are too many inconsistencies and these inconsistencies drive away foreign investors. No investor will bring his/ her money into a volatile economy which ours has become. We must find a way of eliminating this multiplicity of rates in the foreign exchange market.

With the CBN combining the duel functions of fiscal and monetary policy framer and regulator, we will continue to have this confusion. The multiplicity of signals we are getting from the seat of power about the health of the President is also not helping matters. A lot of investors rely on credible information about such issues to make informed decisions about where to put their money.   •Emmanuel Ado (Kaduna-based entrepreneur)

Compiled by: Success Nwogu, Femi Makinde and Infianyi Onuba

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Contact: editor@punchng.com

 

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