Organized private sector groans as MPC retains rate

JULIUS JOHN|   The hope of many Nigerian business men were dashed as soon as the recently held apex bank’s Monetary Policy Committee was over and the reports filtered that the rumoured devaluation of the naira and reduction in interest rates did not pan out.
The Central Bank of Nigeria, CBN, has refused to bow to the pressure to devalue the Naira, as it announced on Tuesday its decision to retain the Monetary Policy Rate, MPR at 11 per cent. It has an asymmetric corridor of +200 and -700 basis points.
However, reactions have continued to trail the decision of the CBN to retain rates. In an interview with the Managing Director of Financial Derivatives, Mr. Bismarck Rewane, he revealed that Nigerians should brace up for challenging times as it cannot expect to live the same way it did when the price of oil was over a hundred dollars per barrel.
According to the Chief Executive of Coleman Wires and Cables Mr. George Onafowokan, business owners have an issue with the CBN’s policy in one way or the other.
“We also do have an issue with it. What the CBN is trying to do is to balance the reserve with the actual demand of dollar positions. However, what is happening now is that the forex demand is above the supply. What now happens for manufacturers like us is that it becomes almost impossible to get what you want,” he said.
“It is like you are in a waiting game, queuing for your turn that might not come anytime soon. You have a request for forex and you are waiting for up to five months to get it through. The falling oil price is not helping the situation. However, you expect the CBN to try and balance the situation,” he added.
For Mr. Ambrose Oruche, the Chief Economist of the Manufacturing Association of Nigeria MAN, he revealed that the decision by the apex bank means that most manufacturers will find it very difficult in the days ahead.
“The decision means that many manufacturers in the country need to brace up for more challenging times as they will find it increasingly difficult to survive in the coming days ahead,” he said.
“Here, at MAN, we felt that some of the CBN’s policies will be relaxed further but it seems the CBN had other ideas,” he added.
It should be recalled that the Lagos Chamber of Commerce and Industry, LCCI, had advised the Central Bank of Nigeria to relax its foreign exchange policies to stimulate economic growth.
In a statement issued on Sunday in Lagos, the LCCI’s Director-General, Dr. Muda Yusuf, said that normalisation of the foreign exchange market was crucial to stemming the current economic downturn.
Dr. Yusuf urged the apex bank to review its foreign exchange policies during its upcoming Monetary Policy Committee meeting scheduled for January 25 and 26.
He said that to deepen the market, foreign exchange from Diaspora remittances, export proceeds, foreign investors, multinational companies and non-governmental organizations, should be allowed to trade freely in the autonomous market.
However, the CBN has chosen a different path and has warned Nigerians to accept present economic reality as the government will be forced to adopt some hard economic policies due to low oil prices.
“It is imperative to brace up for a longer period of low government revenues from oil sources, which would necessitate hard and uncomfortable choices as the economy transits to more sustainable sources of revenue, consistent with the economic realities and strategic objectives of the country, Emefiele said.
“Under the circumstances, certain tradeoffs must be envisaged and duly accommodated,” he said.
“In view of the foregoing, the imperative for consistently sound and coordinated macroeconomic policy has become inevitable. In the medium term within which monetary policy is cast, the need to allow policy to produce the desired outcomes becomes a key consideration in the policy mix,” he added.
Emefiele said the committee believes that oil prices are projected to remain low over a very long period.
On the failure of banks to significantly increase lending to the real sectors of the economy, the CBN boss said that in spite the fact that the expected effects of the rate reduction was yet to translate to more lending to the real sectors of the economy, they apex bank had no power to force any particular interest rate on the deposit Money banks and thus will continue to use moral suasion.
“This is a free market and so we cannot really compel them, as some people expected”, he said.
However, Manufacturers Association of Nigeria, MAN, has raised the alarm that many companies in the manufacturing sector might be forced to close down when they run out of raw materials to continue production.

Disclosing this at the 2016 MAN-Media Luncheon for the Commerce and Industry Correspondents Association of Nigeria, CICAN, in Lagos, President of the Association, Dr. Frank Jacobs attributed the worsening condition of companies to the operations of CBN’s policy restricting some 41 items from accessing foreign exchange through official forex windows.

According to him, the restriction of the items could be seen as the right step to some extent, but the policy measure had to be reviewed as some of the items on the restriction list include raw materials used by those manufacturers, which could not be sourced locally.

Jacobs said the call for revision of the forex policy on the affected items that could not be produced or sourced locally formed one of the association’s advocacy campaigns since last year in furtherance of its commitment towards stabilising the nation’s economy.

He said: “In the last one year, the association engaged government at all levels including Ministries, Departments and Agencies on a number of issues affecting the manufacturing sector and the Nigerian economy. Some of the issues advocated on were resolved while others are currently being addressed. In broad terms, the Association recorded remarkable advocacy successes.”

The industrialist explained that the advocacy had improved MAN’s consultation and contributions to strategic policies of government such as members of several committees of government such as the Presidential Jobs Board, Steering Committee of Micro, Small and Medium Enterprises, MSME, as well as the Steering Committee of National Quality Infrastructure Project.