Analysts and stakeholders in the banking sector have said that the intervention of the Central Bank of Nigeria in the foreign exchange crisis plaguing the country lacks depth and is counterproductive.
The CBN has been injecting intervention funds running into over $2 billion to the foreign exchange market, in a bid to boost the value of the Naira.
To the experts, making attempts to save the face of the Naira and curbing artificial scarcity, which was created by speculators, are not evil but introducing policies that would only provide temporary relief would ultimately backfire.
They contended that in the long run, the value of the Naira would still drop, thus defeating the facesaving measures. CBN’s intervention fund injection, they said, is only a temporary relief that is not sustainable.
Head, Banking and Finance Department, Nasarawa State University, Dr. Uche Uwaleke, explained that taking the Naira back to its green days implied that the Federal Government, through the apex bank, must go back to its drawing board and implement policies that would stimulate economic activities in the different sectors.
This, he said, also implies pulling interest rate and getting money into the real sector.
Uwaleke said, “These put together, will enhance economic activities in Nigeria as more manufacturers will access fund from banks. Injecting such fund in forex is not sustainable as manufacturers would be relieved for a while and suffer later when the government might not be able to continue.
“Sustainability of the present process is the only thing that worries the manufacturers in spite of the assurance from CBN. If the current scenario persists and the manufacturers get cheap forex based on the CBN ‘fire brigade’ intervention, it would be long for the nation to get out of the current economic recession.
He further added, “The meltdown might erupt into full blown crisis if the CBN stop injecting the fund without addressing fundamental issues mentioned above.”
To avoid such looming crisis, another economist, Dr. Kunle Odetola, explained that the battle for the soul of the naira would be won if the CBN could boost liquidity to the Bureau De Change operators for effective unification of rates.
Odetola said, “It is evident that the injection of liquidity to the interbank market, rather than the BDC sub-sector, is not effective and transparent for sustained forex rate convergence and unification.
Statistics from the CBN shows that about20 banks get $80 million weekly for invisible transaction as against the 20 million dollars weekly for over 3,000 CBN licensed BDCs nationwide.
“The CBN should enhance public awareness to guide end users on forex availability and applicable exchange rates. The CBN should diversify the buffers from oil proceeds to foreign investors’ inflows and Diaspora remittances.”
He added that the CBN should sponsor a bill for an act of the National Assembly for naira convertibility in West Africa, as part of the solutions to full recovery of the naira. Convertibility is akin to setting up a wall in the defence of Naira from hostile local and international currency traders that hoard dollars in Nigeria.
STRENGTHEN CONTROL SYSTEM INSTEAD – STAKEHOLDERS
While some stakeholders lauded the efforts of the apex bank to transform the financial system of the country, others do not totally support it as they expressed the belief that the foreign exchange intervention is artificially driven by three non-market forces.
The non-market forces are speculators, hoarders of dollars, and illegal traders. A money market expert, Mr. Charles Obi, stated that the apex bank should curb the activities of the speculators.
He explained, “These are persons who always lurk around to prey on currencies assailed by foreign exchange scarcity. They thus hoard large amounts of dollar bills outside the banking system, evading the anti-graft searchlight.
“They are also illegal traders, people who have profited immensely from the nation’s weak financial control system, wanting to transfer their illicit gains out of the country at any price.”
According to him, as long as these forces are still operating freely in the market, the average Nigerian would not benefit from the intervention of the CBN.
“Few privileged individuals have been corruptly favoured with sneaky allocations of foreign exchange at give-away rates, which they sell to make huge profit.
Their operations have been successful because our financial control system is weak.
The apex bank must upgrade its system to monitor their activities in order to ensure that Nigerians benefit from the interventions,” he said.
Though the President, Manufacturers Association of Nigeria, Mr. Frank Jacobs, admitted that the intervention is encouraging moribund companies to bounce back gradually as they now import machines and raw materials at cheaper rates, he insisted that the sustainability of such development determines whether it would achieve desired result or not.
He said, “Though, the CBN has assured that there is no cause for alarm, our greatest concern is that the move is not sustainable.
Stabilising Naira without a proportionate growth in the productive sector, which usually determines the weight and strength of every nation’s currency, is only cosmetic and may not pass the test of time.”
On his part, the Director General, Nigeria Employers Consultative Association, Mr. Olusegun Oshinowo, said that the p r e s e n t move by t h e C B N w a s j u s t a n i n – tervent i o n a n d the dem a n d for forex in the overall national economy goes beyond addressing the Business Travelling Allowance, Personal Travelling Allowance, medical bill and school fees.
He stated that Nigeria still imports petroleum products, which take the chunk of the forex and which cannot be sustained in the parallel market.
“So, t h e r e is the n e e d for us to look beyond the short term and see if the CBN can meet the forex need of the economy on a long-term basis,” he said. The NECA boss also said, “There is still dearth of forex in relation to providing adequate fund 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 the CBN can meet the forex demand of the economy in the medium term,” he stressed.
NO CAUSE FOR ALARM – CBN
However, Acting Director, Corporate Communications, CBN, Dr. Isaac Okoroafor, assured that the dollar-intervention measure is sustainable and that the apex bank is optimistic that the forex market will remain liquid and that Nigerians, who genuinely require the forex, will get full access to the currency.
