New to site?


Lost password? (X)

Already have an account?



New forex policy cannot bridge official, parallel market gap – expert – NAN

HomeNewsNew forex policy cannot bridge official, parallel market gap – expert – NAN
New forex policy cannot bridge official, parallel market gap – expert – NAN
  • Author
  • Comments
  • Category

An economic expert, Mr Atiku Samuel, said that the recent measure by the CBN with respect to foreign exchange management is not enough to bridge the gap between official and parallel market.

Samuel, who is also the Head of Research at BudgiT Nigeria, said the overall policy framework guiding foreign exchange system was still unclear, as such would continue to pose a problem for the sector.

He said that the source of the foreign currency, which the CBN was using to liquidate the banks, was still from crude oil earnings, meaning that the country was still relying on a single commodity for Forex.

The CBN issued new policy actions on FOREX aimed at easing access to foreign exchange for personal, business and travels as well as educational and medical fees.

The CBN later provided $370.9m to 23 banks to meet the visible and invisible requests of customers.

As part of its new policy action, the CBN also directed all banks in the country to open Forex retail outlets at major airports as soon as logistics permitted them to do such.

He said, “First problem is that we now have a lot of Naira in circulation and fewer dollars to meet demand.

“In terms of supply, the truth is that the biggest supplier of foreign currencies is not the CBN, but remittances from abroad which is largely classified as autonomous sources.

“The reality still remains that most remittances from Diaspora is done through informal channels because you make more when you sell at the black market. So round tripping remains an issue.

“So when you look at if from that perspective, you see how the black market continues to get funded.”

Samuel said the government should come out with a policy that would make most transactions with foreign currencies electronic, therefore eliminating the need for foreign cash.

He said that just as the policy stated that for schools fees and medical the account of the school or hospital will be credited, so also traveller’s cheque or dollar card should be issued to customers travelling abroad for whatever purpose.

He said this would help mop up foreign currencies in the informal sector and bring it back into the official market.

Samuel said there should be a tight monetary policy framework guiding the growth of money at the CBN.


He said, “If you look at how money is growing in Nigeria, it goes straight to the CBN. But how are they expanding this money?

“If you look at Federal Government finances for 2015, the total investment of the CBN in Federal Government securities is about N700bn. But as I speak to you now, it’s getting close to N4tn.

“This means the CBN has been creating money and handing it over to the fiscal authorities to pay salaries and other things.

“Also banks, most of them are interested in just creating loans, lending it out to importers to buy dollars which put enough pressures again on the Naira.”

Samuel, however, agreed that in the short term, the new policy is likely to reduce demand on the black market.

He said that due to insufficient infrastructure and skills to tackle some ailments, medical and education tourism could not be stopped.

Samuel said that if the banks were now allowed to open Forex outlets at major airports, then the regulators should revisit the rules in regard to the existence of Bureau de Change.

But Prof. Uche Uwaleke, an Associate Professor of Finance at Nasarawa State University, applauded the CBN decision to improve Forex access for personal, business travels 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 for much 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,” he said.

On the supply side, Uwaleke said the government should fast-track efforts to improve the ease of doing business and the state of infrastructure, to attract foreign investments.

He said this would help 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 the market-determined value of the naira can be tabled for consideration,” he said.

Related Posts