MPC may retain forex restriction policy

Manufacturers in the country who are hoping for the review of the list of goods not valid for foreign exchange during the Monetary Policy Committee of the Central Bank of Nigeria (CBN) that commenced today, may have their hope dashed.

As financial experts believed nothing has changed in the country’s forex market that would warrant the apex bank reviewing the list of 41 goods whose importers were restricted from accessing forex from the interbank market, bureau de change and export proceeds.

The 245th MPC meeting which is the first in the second half of the year will hold between today and tomorrow.

The former Managing Director, defunct ACB, Mr. Emma Nwosu told Hallmark that the CBN cannot afford to review the forex policy restricting the importers of some goods, because it will amount to policy inconsistence.

According him, there is not pressing need that requires the apex bank to make changes in its forex policies, adding that the CBN may want to watch the impact of these policies for another quarter before considering whether to tinker with them.

In the view of the Managing Director, BIC Consultancy Services, Dr. Boniface Chizea, it would be too early for the apex bank to review the list of goods tagged as not valid for forex.

He reasoned, “It appears that whatever is needed to be done with regard to the rate of exchange is already being handled and I should expect that it might be premature to begin to tinker with anything in this regard.”

The BIC boss advised the CBN to watch the aftermath of the restriction, which was aimed at stabilizing the naira and stimulate local productivity through import substitution mechanism before taking any further decision on it.

“It is however possible that some measures might be put in place to stonewall official dollars from being used for the importation of those items, which have now been excluded from the official market.

One recently read that the Bureau de change have been requested to obtain the BVN of the customers they sell foreign exchange with a fine of one million Naira imposed for first offense and the possibility of license withdrawal in the event of a repeat offense.

But one area I believe the CBN should tinker with is the MPR. I think if for nothing for the share symbolism of the measure this rate should be notionally dropped,” he noted.

Dr. Chizea urged the apex bank to take steps in curtailing the country’s rising inflation, which presently stands at 9.2 per cent.

“My take is that the rate of inflation in Nigeria is not that sensitive to minor reduction on indicative rate of interest. I do not for instance believe that a drop of 100 basis points on MPR would result in any major increase in the demand for credit.

“Another likely outcome is a hold decision as the MPC demurs to wait for the direction of fiscal policy which would become manifest as soon as the Ministers are appointed and therefore we would probably see and expect some definitive measure at the subsequent meeting of MPC which will take a place in another two months from now, ” he opined.

The CBN had on June 23 published a list of 41 items which are not valid for forex in the official market as part of its measures to stabilize that waning naira.

Since then, the organized private sector has been mounting pressure on the apex bank to remove some items from the list, arguing that they are intermediate products which are used as raw materials for their production.

In a telephone interview with Hallmark, the Director-General, Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, said there is urgent need for the CBN to review the list of the items restricted from official forex market in its MPC meeting, because the policy has created a lot of confusion in the manufacturing sector.

“Right now there is a lot of confusion.

The most recent directive excluding 41 items from the forex market is creating a lot of confusion in the community and the banks. Many manufacturers are unable to access forex for their raw materials,” he explained.

According to him, the OPS has informed the CBN on this, so, he expects the MPC to look into Manufacturers complaints and remove raw materials from the restriction list.

He also wants the MPC to review the management of the forex market, which he claimed lacks clear direction.

Renowned economist, Mr. Henry Boyo said he does not expect much from the MPC meeting, because it has not been living up to its billings.

“They have totally failed in their roles as managers of the Nigerian economy. I think they have boxed themselves to a corner.

I don’t see anything useful coming out of the meeting,” he asserted.

He claimed that the MPC has lost its relevance, because it has failed to bring interest rate to best practice of two to three per cent and cost of fund to five or six per cent for the real sector.